What happened
Many investors weren’t eager to chew on shares of Chewy (CHWY -1.17%) Wednesday. Following an uninspiring new analyst note, they traded out of the pet products specialist, sending its share price down by more than 1%, against the 0.2% slump of the S&P 500 index.
So what
That note, an update on leading e-commerce stocks, was written by Wolfe Research analyst Deepak Mathivanan. In his research, Mathivanan generally lowered his expectations for e-commerce titles due to the latest consumer trends.
The analyst cited major factors behind his reasoning. First, he believes that due to high penetration that exceeds 20% in numerous Western markets, growth will start to slow. Second, in his view, revenue growth for e-commerce companies in 2022 was due in part to inflation, and current consensus estimates for such operators are unrealistically high.
Despite his gloomier view, Mathivanan remained bullish on some of the sector’s top names. Chewy, however, wasn’t one of them. Of that stock and e-commerce facilitator Shopify, he wrote that the recent “relief rally” in these companies “pushed me toward stepping to the sidelines” with that pair of titles.
Now what
Mathivanan might not be so hot on Chewy, but he continues to believe that other titles in the space still offer value. He reiterated his outperform (buy) recommendations on sector leaders Amazon and MercadoLibre, on the back of relatively strong fundamentals and attractive valuations. He’s also maintaining his outperform recommendation on eBay, which in his mind still trades at a “highly discounted valuation.”
John Mackey, CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. Eric Volkman has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Amazon.com, Chewy, MercadoLibre, and Shopify. The Motley Fool recommends eBay and recommends the following options: long January 2023 $1,140 calls on Shopify, short January 2023 $1,160 calls on Shopify, and short January 2023 $45 calls on eBay. The Motley Fool has a disclosure policy.
Read More: Why Chewy Was a Dog of a Stock on Wednesday | The Motley Fool