Prediction: Investors Who Buy the Dip in Chewy's Stock Will Be Rewarded

Share prices of Chewy (NYSE: CHWY) plunged after earnings came out last week, despite sales that topped analyst expectations and the company raising its full-year revenue outlook. While some media outlets and pundits pointed to the drop in GAAP earnings as the reason for the fall, professional investors generally pay little attention to this metric, and Chewy saw a big one-time tax benefit a year ago that explains the drop.The real reason for what is now a 10.3% decline appears to be that the pet products e-commerce company had a larger-than-expected increase in operating expenses, which led to its earnings before interest, taxes, depreciation, and amortization (EBITDA) coming in slightly below expectations. Chewy has always had a business model with high fixed costs, and investors want to see more operating leverage out of the company. However, this is generally an easy issue to fix, and the sell-off looks overdone.Image source: Getty Images.Continue readingWeiter zum vollständigen Artikel bei MotleyFool Weiter zum vollständigen Artikel bei MotleyFool