Chewy Barking Up Right Tree: Most Analysts Bullish Even As Stock Crashes After Q4 Print

Zinger Key Points
  • Chewy guided to a sales moderation in the back half of 2023, which appears conservative, one analyst said.
  • The company’s net active customer growth will remain under pressure through the first half of the year, another analyst stated.

Chewy Inc CHWY reported upbeat earnings and sales for its fourth quarter, while announcing a decline in its active customers.

Needham On Chewy

Analyst Anna Andreeva maintained a Buy rating and price target of $55.

“With EBITDA margins well above initial expectations reaching 3% in '22 (during a difficult year for consumer and vs. 4% loss on average pre-pandemic), CHWY is moving ahead with international expansion, with profitability guided flat to down 50 bps in '23,” Andreeva wrote in a note.

“CHWY is the only name we cover that guided for sales moderation in 2H23 with Hardgoods still expected to be under pressure, which we think is conservative,” she added.

Check out other analyst stock ratings.

Oppenheimer On Chewy

Analyst Rupesh Parikh reiterated an Outperform rating and price target of $50.

“CHWY reported another solid all-around quarter,” with its adjusted EBITDA “easily” topping Street expectations, “driven by a stronger top line and well above gross margin expectation,” Parikh said.

The company’s guidance includes “plans to grow internationally with expectations to enter a new market over the next few quarters,” the analyst stated. “International expansion has been speculated in our investor conversations, but the timing is earlier than we envisioned,” he added.

William Blair On Chewy

Analyst Dylan Carden reaffirmed an Outperform rating on the stock.

Chewy’s reported significant earnings acceleration, driven by better-than-expected gross margin and operating leverage, Carden said.

“We expect that some investors will continue to take issue with declines in net active customer growth, which will remain pressured through the front half given continued macro-overhang impacting discretionary category demand, and lingering pandemic-era churn,” the analyst wrote.

“Despite margin headwinds, the company still expects to nearly double free cash flow in 2023 from the $119 million reported in 2022,” he added.

Deutche Bank on Chewy

Analysts downgraded their rating from a Buy to a Hold and reduced the price target from $41 to 35.

"Chewy delivered 4Q results that came in ahead of our more cautious outlook, with pricing being the primary upside driver across the P&L," analysts noted. They also pointed out that Chewy saw users declined by about 120,000 in the quarter.

"Most concerning to us, the outlook for 2023 suggests that while users will flip positive this year, the magnitude of that user growth is likely
tepid at best," the analysts added.

CHWY Price Action: Shares of Chewy had declined by 7.12% to $35.10 at the time of publication Thursday.

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Posted In: Analyst ColorEarningsNewsReiterationAnalyst RatingsMoversTrading IdeasAnna AndreevaDylan CardenExpert IdeasNeedhamOppenheimerRupesh ParikhWilliam Blair
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