Shares of Chewy Inc CHWY have been on an uptrend year to date, reversing losses made after the company’s fiscal third-quarter earnings.
The company is poised for continue acceleration in net additions and significant expansion in EBITDA margins, according to Wedbush analyst Seth Basham.
The Chewy Analyst: Basham upgraded the rating for Chewy from Neutral to Outperform, while raising the price target from $35 to $55
See Also: Chewy's Conservative Guidance Appropriate Amid Macro Economic Volatility
The Chewy Thesis: The pet sector is resilient and should continue benefiting from “steady demand for consumables in 2023” and easy comps in hardgoods sales, Basham said in the upgrade note.
“CHWY should benefit from a return to outsized e-commerce channel growth as the reopening period from the pandemic is now in the rearview mirror,” the analyst wrote.
Basham said he expects Chewy’s gross customer adds to rise “modestly” in 2023, which will help drive future growth. “Most importantly, we expect FY23 customer churn to sharply moderate (we estimate 5.1m churned vs 6.1 m in FY22),” he added.
“We also expect a solid 4Q22, with more upside than downside risk to sales and particularly margins."
CHWY Price Action: Shares of Chewy had declined by 0.01% to $43.97 at the time of writing Friday.
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