Chewy Stock 'Attractive' After Q4 Earnings, But Wall Street Flags 'Weak' Pet Care Sector

Zinger Key Points
  • Chewy beat fourth-quarter earnings per share and revenue guidance from analysts.
  • Guidance and the weak pet care industry has analysts mixed on what the future holds for the stock.

Leading pet care e-commerce company Chewy Inc CHWY reported fourth-quarter financial results after market close Wednesday.

Here's a look what analysts are saying about the results and what's next for the company.

The Chewy Analysts: Wedbush analyst Seth Basham had an Outperform rating and a $25 price target.

JPMorgan analyst Doug Anmuth had an Overweight rating and lowered the price target from $25 to $22.


Goldman Sachs analyst Alexandra Steiger maintained a Buy rating and lowered the price target from $36 to $32.

Needham analyst Anna Andreeva had a Buy rating and a $25 price target.

See Also: Chewy Q4 Earnings Highlights: Pet Retailer Notches Revenue, EPS Beat, CEO Targets Margin Expansion

Wedbush on Chewy: A good quarter and guidance that "leans positive" were highlighted by Seth Basham in a new investor note.

"We look positively on the results and outlook as CHWY continues to gain market share and materially expand margins in a weak industry environment with pet adoptions trending down 30% y/y and no inflation," Basham said.

The analyst said net active customers for Chewy could decline in the first half of 2024 before improving in the second half of 2024 with the industry outlook getting more positive.

"Positively, CHWY believes that gross adds have normalized at pre-COVID levels while customer churn pressures are stabilizing with pandemic-era customer churn pressures behind the company."

Basham said the company's infrastructure and automation being built out is improving profitability.

JPMorgan on Chewy: Growth at the pet care company is under pressure, according to Doug Anmuth.

"Top line trends overall remain lackluster, with margins and FCF generation the bright spots," Anmuth said. "We believe macro remains a sizable headwind on the industry broadly — noting et adoptions declined 30% y/y."

The analyst looked to Chewy Health and Autoship as items that could help with growth.

Anmuth said near-term pressure on Chewy stock and sales could be "mostly macro related" and diversification efforts could pay off.

"We believe pet is a growing and highly attractive category that is early in the shift online, and, in our view, Chewy is well positioned as the leader in online pet."

Goldman Sachs on Chewy: The 2024 year could be a "year of normalization" for the pet category, impacting Chewy, Alexandra Steiger told investors in a new note.

The analyst said Chewy's themes in the fourth quarter were a volatile backdrop for the pet category, guidance in-line with analysts' estimates and market share gains.

"Despite an environment that remains challenging, CHWY expects to continue to gain market share over time and is displaying a consistent track record of execution against a wide array of strategic initiatives that we expect will support a long runway for growth," Steiger said.

The analyst said Chewy Health, international expansion and advertising growth are keys for the company going forward.

Needham on Chewy: Guidance from Chewy for flat net ads in 2024 disappointed Anna Andreeva.

Outside of the net ads, guidance for financials was strong.

"The profitability guide for the year exceeded both sell-side and buy-side models," Andreeva said.

The analyst said valuation on Chewy stock is "starting to look washed out."

"As the story transitions from growth to value, valuation oat 0.6x EV/Sales on our '24 estimate is the 3rd cheapest in our universe and we think the stock is attractive."

CHWY Price Action: Chewy shares are down 6.76% to $16.54 on Thursday versus a 52-week trading range of $15.78 to $40.78. Shares of Chewy are down over 50% over the last year.

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Posted In: Analyst ColorPrice TargetReiterationTop StoriesAnalyst RatingsMoversAlexandra SteigerAnna AndreevaDoug Anmuthe-commerceecommerceecommerce stocksGoldman SachsJPMorganNeedhamPet Carepet stockspetsSeth BashamWedbush
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