What happened
Shares of Trupanion (NASDAQ: TRUP) have rocketed 27.7% higher so far this week, according to data from S&P Global Market Intelligence. The medical insurer for pets announced that it is partnering with Chewy (NYSE: CHWY), the online retailer focused on the pet market.
So what
On Dec. 7, Trupanion announced its partnership with Chewy. The deal offers exclusive health and wellness plans to Chewy's 20 million active customers and will be available in the spring of 2022. By partnering with Trupanion, Chewy helped validate the insurer's direct-to-vets pay model, and the deal also eliminates Chewy as a potential competitor to Trupanion in pet health insurance.
Image source: Getty Images.
Right now, Trupanion only has slightly over 1 million pets enrolled on its insurance platform. With the chance to directly market its products to the 20 million (and growing) customers on Chewy's website, it is no wonder investors are so excited about this partnership for Trupanion, as it could help drive customer growth for years to come.
Now what
Trupanion has been a great long-term performer, with the stock up over 1,000% since going public in 2014. After the recent bump, it has a market cap of $5.8 billion, giving the company a trailing price-to-gross-profit ratio (P/GP) of approximately 30. This is very expensive. However, if Trupanion is able to get even a few million of Chewy's customers to buy pet health insurance, this valuation could come down rather quickly.
This partnership is fantastic news for Trupanion shareholders, and likely will be a good addition to Chewy's business as well.
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Brett Schafer has no position in any of the stocks mentioned. The Motley Fool owns and recommends Chewy, Inc. and Trupanion. The Motley Fool has a disclosure policy.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
