Market Overview

Wedbush Initiates Coverage On Chewy: 'We Await A Better Entry Point'

Share:
Wedbush Initiates Coverage On Chewy: 'We Await A Better Entry Point'

Recent pet product IPO Chewy Inc (NYSE: CHWY) has drifted slightly lower since its debut on the market last week, but one analyst said investors shouldn’t be tempted to buy the dip just yet.

The Analyst

Wedbush analyst Seth Basham initiated coverage of Chewy with a Neutral rating and a 12-month price target of $30.

The Thesis

Basham likes Chewy’s scalability and margin expansion potential and believes the stock will eventually make for a great long-term investment. However, the stock seems fully priced based on customer lifetime modeling and the earnings multiples of its peer group. Basham said his $30 price target represents fair value for Chewy shares.

“With CHWY trading above these levels following its $22 IPO last week, we await a better entry point,” he wrote in a note.

Basham said Chewy provides a compelling value for its customers by making finding and buying the right products easier, offering competitive pricing, and making reordering and delivery simple.

Basham said the pet product market is a relatively stable and fast-growing market, and Amazon.com, Inc. (NASDAQ: AMZN) is Chewy’s primary competitor in online pet product sales. Wedbush estimates the U.S. pet care market is valued at $51 billion, and online pet product sales have growth at a 41% compound annual rate over the past five years.

Basham said revenue growth will remain strong but will likely decelerate in the coming years. At the same time, investors should expect margins to expand starting in 2021.

Price Action

Chewy shares traded lower by 4.6% to $32.64 on Friday.

Related Links:

Why Slack's IPO Investor Sentiment Might Be A Good Omen

MKM Weighs In On Chewy, Says Investors 'Hungry' For Pure-Play Online Pet Retailer

Latest Ratings for CHWY

DateFirmActionFromTo
Jul 2019Initiates Coverage OnOutperform
Jul 2019Initiates Coverage OnHold
Jul 2019Initiates Coverage OnEqual-Weight

View More Analyst Ratings for CHWY
View the Latest Analyst Ratings

Posted-In: Seth Basham WedbushAnalyst Color Price Target Initiation Analyst Ratings Best of Benzinga

 

Related Articles (AMZN + CHWY)

View Comments and Join the Discussion!

Latest Ratings

StockFirmActionPT
DPZMaintains280.0
SCHWMaintains52.0
GWWMaintains291.0
LIIMaintains276.0
SWKMaintains154.0
View the Latest Analytics Ratings
Don't Miss Any Updates!
News Directly in Your Inbox
Subscribe to:
Benzinga Trading Daily
Get pre-market outlook, mid-day update and after-market roundup emails in your inbox.
Market in 5 Minutes
Everything you need to know about the market - quick & easy.
Daily Analyst Rating
A summary of each day’s top rating changes from sell-side analysts on the street.
Thank You

Thank you for subscribing! If you have any questions feel free to call us at 1-877-440-ZING or email us at vipaccounts@benzinga.com

New York State Votes To Decriminalize Cannabis After Failing To Fully Legalize It

PayPal Analysts Not Too Concerned About Executive Change