Morning Markets: Shares of online pet supply group Chewy are skyrocketing this morning after pricing above-range.
After shares of Fiverr and CrowdStrike priced strongly and enjoyed strong first-day debuts, the IPO cycle put up more points this morning with the successful debut of Chewy. Chewy, an online pet supply group, priced its shares at $22 per share yesterday, raising just over $1 billion and putting up a market cap just a shade under $9 billion.
That value, however, has been quickly outstripped. Chewy is currently worth $39.66 per share, up 27 percent as of the time of writing. That values the firm at around $15.9 billion if our morning math checks out.
Chewy has been up since the moment it began trading. The company’s first trade rang in $36 per share, up 63.6 percent.
Another IPO, another strong result, so what? Well, it’s all well and good that CrowdStrike did well in its IPO. It had quickly growing revenue and falling losses. That’s a great formula in today’s market; investors want growth, and falling losses indicate a model that works.
Fiverr was the same, albeit with slower growth. So, what did Chewy bring to the table?
The same. Chewy’s estimates for what amounts to its most recent quarter include revenue growth of $763.5 million in the year-ago period, to $1.11 billion. The firm’s net loss also slimmed from $59.8 million in the year-ago quarter, to $29.6 million in the most recent. Free cash flow, however, worsened from -$58.7 million in the year-ago period to -$63.4 million in the most recent quarter.
So Chewy mostly fits the current model of success, bringing growth and slimming losses. That makes its success understandable. At the same time, the company is selling Class A shares in its IPO, which come with one vote. Class B stock, which the company holds lots of, 10 votes per share. Harumph, I hate this sort of dual-class shenanigans.
But whatever, says the market, Chewy is worth around 64x times its current, annualized gross profit!
And with that, have an excellent Friday, listen to Equity, and have a great weekend.
Illustration: Li-Anne Dias.