What's Important in Small-Cap Stocks: Chewy's Earnings Report, Signet Jewelers' Success, American Eagle Falls Short

Clothing retailer American Eagle has stopped using celebrity endorsements in its advertising. Failed trials of a drug by pharmaceutical giant Novartis dragged down the stock price of biotech company Dyne—whose drug has a similar mechanism of action. Jewelry retailer Signet Jewelers released a strong earnings report—which helped the company’s stock rise by a quarter. Highlights from the small-cap sector for the week of September 7–11 are featured in the Oninvest digest.

American Eagle Outfitters —a manufacturer of jeans and other clothing—will replace billboards featuring celebrities, including actress Cindy Sweeney and Barcelona midfielder Lamine Yamal, with digital ads. The company hopes this will improve its performance: in the second quarter, the retailer’s comparable sales rose 6% year-over-year, while Wall Street had expected growth of 6.7%.

Celebrities have helped raise awareness of the American Eagle brand, and the company hopes to use digital advertising to encourage consumers to make purchases. The first results from the new marketing strategy are expected in the fourth quarter.

Following the release of the report, American Eagle’s stock fell nearly 14% during trading on September 10. According to MarketScreener, 13 Wall Street analysts recommend holding the company’s stock, while one each recommends buying and selling. The average target price for the stock is $18.4, which is nearly 22.5% higher than its closing price on September 11.

The quarterly sales figures from Chewy, an online pet supplies retailer, failed to impress Wall Street. Chewy’s net revenue for the quarter ended August 2 rose 7.3% year-over-year to $3.33 billion. Adjusted earnings were $0.36 per share, compared with $0.33 a year earlier. Both figures were somewhat underwhelming and roughly in line with Wall Street’s forecasts, according to Barron’s.

The company's stock fell 10.8% on September 9—its largest one-day decline of the year. Most Wall Street analysts are positive on Chewy: 21 recommend buying the stock, while another ten recommend holding it. The average price target is $28.32, which is 38.5% higher than the closing price on September 11.

Due to unsuccessful trials of a drug developed by Swiss pharmaceutical giant Novartis, shares of mid-cap biotech company Dyne Therapeutics fell 16.4% on September 8—the company uses similar technology in its own development.

Novartis’ experimental drug del-desiran—a treatment for one type of myotonic dystrophy— did not prove more effective than a placebo in the final phase of clinical trials. Dyne is developing a therapy for the same disease based on a similar mechanism of action. The company announced that it will present additional data from trials of its drug in the coming weeks.

According to MarketWatch, 16 Wall Street analysts who track the company currently recommend buying its stock, while only one recommends selling it. The average price target is $37.27, which is 102.8% higher than the closing price on September 11.

The owner of the jewelry brands Jared and Kay Jewelers, Signet Jewelers, known for its diamond jewelry, wedding bands, and engagement rings, reported a 36% increase in quarterly adjusted earnings per share (EPS) to $2.19. Analysts had expected $1.74. The company’s stock rose nearly 24% during trading on September 9.

Wall Street analysts are divided on Signet’s outlook: the company’s stock has six “hold” ratings and five “buy” ratings. The average price target is $125.56—25% higher than the stock's closing price on September 11.