Chewy Inc. (NYSE: CHWY) shares turned volatile yesterday after Keith Gill, who is popularly known on social media as Roaring Kitty, revealed a new ownership stake in the company worth approximately $260 million, making him the third-largest shareholder of Chewy. Roaring Kitty has previously praised Ryan Cohen, the founder of Chewy, whose appointment as CEO of GameStop Corp. (GME) was received as welcome news by the trader at a time when he was actively trading GameStop shares. After jumping more than 20% during pre-market trading yesterday, Chewy shares lost around 7% during regular trading as Roaring Kitty was slapped with a class-action lawsuit claiming that the trader has carried out pump-and-dump schemes in the last couple of months to profit from market volatility.
Who Is Roaring Kitty?
Roaring Kitty is the online identity used by former financial analyst Keith Gill who now actively invests in stocks. The trader became popular during the original meme stock mania in 2021 when he accurately predicted GameStop would benefit from a short squeeze as the company was one of the most shorted stocks back then. When GameStop stock took off in the first quarter of 2021, Keith Gill profited over $300 million based on the data shared by the trader publicly.
As recently as last June, a single X post by Roaring Kitty sent GameStop shares 21% higher in one trading session, which highlights how the trader can influence stock price movements. Although it is always advisable to conduct thorough, independent research before investing in the stock market, closely following the moves of Roaring Kitty may not be a bad idea for a trader who is focused on identifying volatility breakouts in the short term.
What The Analysts Are Saying
Mizuho Securities analyst David Bellinger wrote in a note earlier today that Chewy is likely to be considered a meme stock in the foreseeable future despite improving fundamentals because of Roaring Kitty’s acquisition of a stake in the company. This is not an encouraging sign given that long-term-oriented investors were betting on reduced volatility in Chewy shares in the future, which will be hard to achieve with the market treating it as a meme stock. CFRA Research analyst Arun Sundaram also warned yesterday that investors should brace for a period of unusual volatility given Roaring Kitty’s involvement with the company. Based on the ratings of 22 Wall Street analysts, the average Chewy price target is $25.93, which implies an upside potential of just 4% from the current market price.
Neither Dilantha DeSilva nor Stocks.News have positions in this company.
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Dilantha is a former buy-side equity analyst who now contributes to Seeking Alpha, GuruFocus, TipRanks, and ValueWalk. He is the founder of Beat Billions, a premium investment research subscription service on Seeking Alpha’s Marketplace. He has appeared on CNBC and Bloomberg to discuss stock markets and the global economy.