Why Chewy Stock Sank by 6% on Thursday

Chewy (NYSE:CHWY) stock took another hit on Thursday, a day after getting dinged by investors reacting to the company's third-quarter earnings report. While there was no direct news of note from the company, one analyst tracking its shares downgraded his recommendation. The result was that Chewy's share price fell by 6% across the trading session, a notably steeper decline than the S&P 500 index's 0.2% drop.

Rover has not earned a treat

Well before market open that day, Exane BNP Paribas' Chris Bottiglieri changed his recommendation on Chewy. It's now a neutral, according to him, where previously he felt it was worthy of an outperform (i.e., buy). His price target currently stands at $30 per share.

It wasn't immediately clear why Bottiglieri made the adjustment, although it hardly seems coincidental that it almost immediately followed that earnings announcement. Although the pet care company managed to grow its revenue and flip to a bottom-line profit, its net income figure came in under the consensus analyst estimate.

It has to be said that, while no pundits upgraded their Chewy recommendations Thursday, several bumped their price targets higher. Among these raisers were analysts from TD Cowen, Guggenheim, and Goldman Sachs; however these raises were relatively modest.

Better days ahead?

These days, investors expect retail stocks to post robust growth figures -- often, it isn't sufficient if they show only single-digit improvements -- and Chewy's top-line improvement was 5% year over year. It isn't necessarily fair that they're punished in this way, and I think Chewy deserves better -- not least because management is forecasting a much better growth figure (13%) for its current quarter.

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Eric Volkman has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Chewy and Goldman Sachs Group. The Motley Fool has a disclosure policy.