E-commerce pet retailer Chewy (CHWY) has soared 134% over the past year, as revenues have grown. One trader sees further gains over the coming weeks.
That’s based on the June 6 $40 calls. With 23 days until expiration, 8,974 contracts traded compared to a prior open interest of 107, for an 84-fold rise in volume on the trade. The buyer of the calls paid $1.50 to make the bullish bet.
Chewy shares recently traded for just under $40, making this an at-the-money trade. The strike price of the option is right at Chewy’s 52-week high of $40.38.
Operationally, Chewy has had a mixed year. Revenues grew by 15%, but earnings growth declined by 30%.
Valuations are high, with Chewy shares trading at 42 times earnings, and profit margins are slim, even for a retailer, around 3%.
Action to take: Chewy shares remain down more than 50% from their all-time highs from late 2021, but have been grinding steadily higher since early 2024.
Momentum investors may like shares here, as the stock will likely keep trending higher over time, even with the high current valuation.
Chewy does not currently pay a dividend, so investors looking for one need to go elsewhere in the retail space.
For traders, the June 6 $40 calls play well to the market’s current uptrend, and the option expires right before Chewy’s next earnings report on June 11. Traders may be able to get back into calls after earnings if shares take a hit.
Disclosure: The author of this article has no position in the company mentioned here, but may trade after the next 72 hours. The author receives no compensation from any company mentioned in this article.