Shares of pet-focused eCommerce platform Chewy (NYSE:CHWY) cratered nearly 11% in the early session today after the company delivered a mixed third-quarter performance. Additionally, a lackluster financial outlook drew a mixed response from Wall Street.
During the quarter, revenue increased by 8.3% year-over-year to $2.74 billion. Still, the figure lagged expectations by $10 million. In addition, adjusted EPS of $0.15 came in $0.04 higher over the prior year period. Further, Chewy’s gross margin improved by 10 basis points to 28.5%, and adjusted net income increased by $14.6 million to $63 million.
Amid broader industry-wide challenges, Chewy expects net sales of $2.78 billion to $2.80 billion for the fourth quarter. Additionally, the company narrowed its net sales outlook for Fiscal Year 2023 to between $11.08 billion and $11.1 billion.
What is the Future of Chewy Stock?
Following this performance, Citi’s Steven Zaccone reiterated a Hold rating on Chewy alongside a $18 price target. Zaccone noted that the sales guidance was lower than expected and stability in the company’s top line would be “Needed to restore confidence in the growth trajectory of the business.”
On the other hand, Morgan Stanley’s Lauren Schenk maintained a Buy rating on the stock with a $27 price target. Schenk commented, “We see a significant runway for gross margin expansion as promoted listings ramp up, consumables mix lowers, and CHWY is able to drive further efficiencies.”
Today’s price decline comes on top of a nearly 54% value erosion in Chewy shares over the past year. Overall, the Street has a Moderate Buy consensus rating on Chewy. The average CHWY price target of $28.64 points to a substantial 48% potential upside in the stock.
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