Online pet supply store Chewy Inc CHWY on Thursday reported its first ever earnings as a public company. Here is a summary of how three analysts reacted to the print.
Raymond James' Aaron Kessler maintains a Market Perform rating on Chewy's stock.
Wedbush's Seth Basham maintains at Neutral, unchanged $30 price target.
Morgan Stanley's Brian Nowak maintains at Equal-Weight, price target lifted from $33 to $34.
Shares of Chewy were trading lower by 2.6% at $31.98 Friday afternoon.
Raymond James: 4 Positive Takeaways
Chewy's overall "solid" report is highlighted by a few main takeaways, Kessler wrote in a note. These include management guiding 2019 revenue to be up 32-34% versus expectations of 31% and Autoship revenue expanding from 62.5% of sales in the first quarter 2018 to 67.1% in the reported quarter and came in at $744 million.
Despite a positive earnings report, Chewy's stock is "fairly valued" at 2.3 times 2020 EV/Revenue and 10 times 2020 EV/GP versus the peer group at 3.4 times and 6.4 times, respectively, the analyst wrote. As such, the risk-reward profile on the stock is "more balanced" at current levels.
Wedbush: Strong But Slowing Growth
Chewy's revenue guidance of 32%-34% growth in 2019 is "solid" but implies a notable deceleration, Basham wrote in a note. EBITDA guidance implies a "more modest" improvement for the rest of the year compared to the fiscal first quarter.
Basham said it's likely management's guidance is conservative and gives management some flexibility to invest in customer acquisition and pricing if necessary. Also, it appears management is set on investing for long-term instead of achieving near-term higher EBITDA margins.
The absence of quarterly EBITDA guidance makes it more difficult to gauge several key metrics, including number of gross new customers or mix of sales from repeat customers. Basham said the lack of quarterly EBITDA guidance comes right after the pre-IP disclosure showed "solid" but slightly weakening trends since 2015.
Morgan Stanley: Signs Of Momentum
Chewy's earnings report and outlook emphasizes why it's a leader in the online pet category, Nowak wrote in a note. Specifically, the high end of management's 2019 guidance was 2% higher than previously estimated and "speaks to its business momentum" and scale.
The stock's valuation at 2.2 times estimated 2020 revenue is the only reason against being constructive on the stock, the analyst wrote. As such, investors may want to consider waiting for a better entry point.
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