This company's performance is challenging the traditional definition of meme stocks

By James Rogers

Online retailer of pet food and products Chewy "has fundamentals and also the social interest," says Dan Raju of Tradier

Meme stock chatter continues to swirl around Chewy Inc., but Dan Raju, the CEO of cloud-based financial-services provider Tradier, says the online retailer of pet food and products is challenging the traditional definition of a meme stock.

"The traditional memes, they have some social interest and sometimes some evangelistic or community leader interest," he told MarketWatch. "But the fundamentals are weak."

Chewy (CHWY), however, is an interesting combination, according to Raju. "As far as I can see, it's a combination of where there's a lot of community interest - at the same time, the company has moved on to have some solid fundamentals," he said.

Related: Chewy's stock registers longest winning streak on record following cryptic Roaring Kitty post

"The company basically has fundamentals and also the social interest," he added. "I look at Chewy as a use case where the traditional definition of meme stocks is being challenged."

Chewy's results have certainly been strong. In its fourth-quarter results earlier this year, the Florida-based company reported a profit and again topped analysts' top- and bottom-line estimates in its first-quarter results in May, sending the stock soaring. Chewy also pointed to signs that pet adoptions are up again. Last month Chewy's stock soared after the company reported better-than-expected second-quarter earnings and gave upbeat guidance.

"If you take a look at the company's performance, it seems to be performing well," said Raju. "Chewy questions the assumption that meme stocks lack fundamentals."

Related: Chewy's stock soars after profit beats by a wide margin and company offers upbeat guidance

Set against this backdrop, the company's stock is up 35.7% in 2024, outpacing the S&P 500 index's SPX gain of 18.1%.

Meme stocks were thrust into the spotlight again earlier this year when influential trader Keith Gill, also known as Roaring Kitty, returned to social media. Gill was a pivotal figure in the 2021 meme stock frenzy that sent shares of AMC Entertainment Holdings Inc. (AMC) and GameStop Corp. (GME) soaring.

On June 27 Gill posted a cryptic image of a dog on X, formerly Twitter, sparking speculation that it could be a reference to Chewy, and prompting that company's stock to briefly surge. It was subsequently revealed that Gill was holding a significant position in Chewy.

Related: Roaring Kitty, rumors, and 'tin foil hat conspiracy theorists': What's next for meme stocks?

Meme-related attention was focused on Chewy again earlier this month when Gill made his first social-media post in two months. In the Sept. 6 post on X, Gill posted a still from the scene in the movie "Toy Story 2" in which the toy named Woody is dropped by the character Andy. The same dog image that was used in Gill's last post on June 27 is superimposed over Woody's face.

The still comes from a nightmare sequence in the 1999 animated film. In recent years, the image has become a meme dubbed "I don't want to play with you anymore" and has been used to illustrate mass abandonment of video games, according to the website Know Your Meme.

Nonetheless, Chewy's stock embarked on a winning streak on Sept. 6 that lasted for seven days. This marked the stock's longest winning streak on record, based on available data going back to June 14, 2019, Dow Jones Market Data show.

-James Rogers

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09-18-24 0911ET

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