Why Chewy Stock Crushed It in April

Many investors spent April worrying about the effect of the still-fresh tariff war on their holdings. To hedge against this concern, they sought out stocks considered to be relatively well insulated from possible sudden price spikes of materials and components made abroad.

Enter Chewy (NYSE: CHWY), the next-generation pet food and supply specialist. Chewy fit the profile of a solid, domestically oriented company, and investors piled into the stock. It exited April with an over 15% gain across the month.

Top hedging candidate

What helped enormously with the narrative that Chewy is a fine hedge was that it was promulgated during the month by several analysts tracking the company.

Citigroup, for one, flagged Chewy in a re-evaluation of top retail stocks it published just after the Trump administration annonuces a slew of "reciprocal" tariffs. According to reports, Citigroup's take was that big retailers were most exposed, owing to their considerable imports of goods from affected nations such as China and India.

Image source: Getty Images.

On the flip side, Citigroup elevated -- or maintained its bullish views on -- several stocks that it considered to be less dependent on manufacturing from such nations. Chewy was one that the bank left intact as a buy.

Analysts weren't only bullish on the pet goods purveyor because of its domestic focus. Piper Sandler's Anna Andreeva pointed to several solid fundamental reasons for investing in the stock. Just after the Citigroup note was published, she disseminated an update, in which she reiterated her overweight (read: buy) recommendation and $40-per-share price target.

In Andreeva's view, according to reports, the U.S. is set for a rise in overall pet ownership, particularly of cats. She added that veterinarians increasingly favor Chewy's healthcare products. Finally, she commented that Chewy is one of her company's favorite stock titles at the moment.

A company that's maturing well

Chewy's days of white-hot growth are behind it as it matures into a new stage of development -- rather like a puppy or a kitten who's growing up. Yet the company continues to post encouraging growth numbers, not least because it's cleverly pushed its Autoship renewal program on its customers. This approach builds ever-valuable recurring revenue while increasing customer loyalty.

I think the tariff hedge story will fizzle out before long, not least because President Trump and his team have shown a clear willingness to either compromise or carve out significant exemptions. But that leaves the fundamental story with Chewy, and in its case the tale is a compelling one. I'd be on the side of those bullish analysts in considering the company's stock a fine buy candidate.

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Citigroup is an advertising partner of Motley Fool Money. Eric Volkman has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Chewy. The Motley Fool has a disclosure policy.