Chewy Impresses With Strong Q1 Results; Analysts Envision Stabilized Customer Growth And Enhanced Profitability Ahead

Zinger Key Points
  • Chewy's Q1 2024 results beat estimates, with adjusted EPS at $0.31 and sales reaching $2.88 billion.
  • Analysts show optimism, raising price targets and ratings on Chewy, foreseeing continued growth in pet e-commerce.
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Chewy, Inc. CHWY shares are trading higher on Thursday.

Yesterday, the e-commerce retailer for pet supplies reported better-than-expected first-quarter 2024 results. The pet care company reported adjusted EPS of $0.31 compared to the consensus of $0.07 and $0.20 a year ago. The company reported sales of $2.88 billion, up 3.1% Y/Y, marginally above the consensus of $2.85 billion.

Here’s a glimpse into some analyst opinions and reactions to the company’s quarterly performance:

JP Morgan analyst Doug Anmuth reiterated the Overweight rating on Chewy, raising the price forecast to $28 from $22.

The analyst highlighted the early positive signs regarding pet household formations and the company’s CRM initiatives, which are bearing fruit.

Per Anmuth, management’s tone was notably more upbeat than at fourth-quarter earnings or the December ’23 Investor Day, but the company is also being measured around slight improvements in the industry backdrop.

The analyst tweaked the top-line higher in FY24 &

FY25, but raised Adj. EBITDA more materially by 11% & 7%, highlighting category positioning, new growth verticals, profit trajectory, capital returns, and improving execution.

Looking ahead, the analyst sees Active Customers to stabilize in the second half.

Anmuth also underscored Chewy’s prudent approach with its outlook, given it remains early in the year. However, the management tweaking the guide higher with 2QFY earnings won’t be surprising.

The analyst models 2Q net sales +3% year over year (at the high-end of the company’s outlook) and the full-year +5% year over year (slightly above the midpoint), with Adj. EBITDA margins of 3.8% & 4.2%, respectively.

Goldman Sachs analyst Eric Sheridan reiterated the Buy rating on Chewy, raising the price forecast to $35 from $32.

With these results, Sheridan projects investors to remain focused on continued signals of operational improvements (both industry-wide and company-specific) in the coming quarters, which would support a narrative of accelerating revenue growth and rising operating margin trajectory.

Overall, the analyst continues to see Chewy shares as attractively skewed on a risk/reward basis from current levels (even incorporating the stock’s strong +27% reaction following the earnings report).

Raymond James analyst Rick B. Patel reiterated an Outperform rating on the stock, raising the price forecast to $24 from $19.

The analyst remains bullish on the company’s encouraging demand green shoots, coupled with margin upside.

Wedbush analyst Seth Basham reiterated an Outperform rating on Chewy, raising the price forecast to $28 from $25.

Per Basham, the company can drive active customer growth in the second half, especially as it moves past elevated retention headwinds from 1H23 cohorts with a higher mix of discount-driven customers currently pressuring churn.

Additionally, benefits from cross-sales of pharmacy products continues to drive net spending per average customer (NSPAC) higher with further room for improvement and additional upside potential if industry demand normalizes.

Accordingly, the analyst now looks for FY24 sales near the high end of guidance.

Needham analyst Anna Andreeva reiterated a Buy rating on Chewy, raising the price forecast to $30 from $25.

According to the analyst, the company is seeing share gains coming from 3 main channels–independents (est. 10% of distribution), pet specialty (PetSmart, Petco), and food, drug and mass.

While Walmart Inc. WMT is winning in value and healthcare, and Amazon.Com, Inc.AMZN is gaining in Hardgoods, Chewy is working to close that gap.

Mizuho analyst David Bellinger reiterated a Neutral rating on Chewy, with a price forecast of $18.

Price Action: CHWY shares are trading higher by 1.6% to $21.84 at last check Thursday.

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Photo via Pixabay

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