Chewy impresses with strong first quarter results; Analysts Predict Steady Customer Growth and Increased Profitability – Chewy (NYSE:CHWY)

Chewy, Inc. (NYSE:CHWY) shares are trading higher on Thursday.

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

Here’s a look at some analyst opinions and reactions to the company’s quarterly results:

JP Morgan analyst Doug Anmuth maintained an “Overweight” rating on Chewy, raising his price forecast to $28 from $22.

The analyst noted early positive signs of pet-friendly development and the company’s CRM initiatives coming to fruition.

According to Anmuth, management’s tone was much more optimistic than it was during the fourth quarter results or Investor Day in December 23, but the company’s rating is also based on the slight improvement in the industry.

Analyst increased profit for FY24 and

FY25 but raised adj. EBITDA up 11% and 7%, highlighting category positioning, new growth verticals, earnings trajectory, capital returns and execution improvement.

Looking ahead, the analyst expects the number of Active Customers to stabilize in the second half of the year.

Anmuth also emphasized Chewy’s cautious approach in its forecasts, given that they remain early in the year. However, it will not be a surprise if the management board raises the indicator after the second quarter results.

The analyst is modeling Q2 net sales +3% year over year (at the high end of the company’s outlook) and full year +5% year over year (slightly above the midpoint), with Adj. EBITDA margin of 3.8% and 4.2%, respectively.

Goldman Sachs analyst Eric Sheridan maintained a Buy rating on Chewy, raising his price forecast to $35 from $32.

With these results in mind, Sheridan anticipates investors will continue to focus on continued signals of operational improvement (both industry-wide and within the company) in the coming quarters, which would support the narrative of accelerating revenue growth and an expanding operating margin trajectory.

Overall, the analyst continues to believe Chewy’s stock has an attractive risk-to-reward curve compared to current levels (even considering the company’s strong +27% stock reaction following the earnings report).

Raymond James analyst Rick B. Patel maintained his recommendation for the company’s shares “Outperform”, raising the price forecast to $24 from $19.

The analyst remains upbeat on the company’s encouraging demand for green shoots coupled with margin expansion.

Wedbush analyst Seth Basham maintained his “Outperform” rating on Chewy, raising his price forecast to $28 from $25.

According to Basham, the company can deliver active customer growth in the second half of the year, especially after overcoming difficult cohort retention issues in the first half of 2023, with more discount-minded customers now putting pressure on churn.

Additionally, the benefits of pharmacy cross-selling continue to increase net spend per average customer (NSPAC), which creates further room for improvement and additional growth potential if industry demand normalizes.

As a result, the analyst currently expects FY24 sales to be near the high end of forecasts.

Needham analyst Anna Andreeva maintained her Buy rating on Chewy, raising her price forecast to $30 from $25.

According to the analyst, the company is recording share increases in three main channels – independent (approx. 10% of distribution), specialized for pets (PetSmart, Petco) and food, pharmaceutical and mass.

One sec Walmart Inc. (NYSE:WMT) wins on value and healthcare, and Amazon.Com, Inc.(NASDAQ:AMZN) is gaining on Hardgoods, Chewy is working to close the gap.

Mizuho Analyst David Bellinger maintained a neutral rating on Chewy, with a price forecast of $18.

Reduction: CHWY shares were up 1.6% at $21.84 at last check on Thursday.

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