Like for many other names, 2022 has mostly been a miserable outing for online pet-supply seller Chewy (CHWY) and the shares have been thoroughly hammered by the market. However, following the company’s latest financial results, investors finally had something to wag their tail about.
Shares trended 24% higher in Thursday’s session after the company delivered a better-than-expected first quarter report.
Revenue increased ~14% from the same period a year ago to reach $2.43 billion, $20 million above the Street’s expectation of $2.41 billion. Net income came in at $18.5 million, or 4 cents a share, while the analysts had modeled a loss of 11 cents a share.
Chewy also delivered on the outlook. Guidance called for Q2 revenue between $2.43 billion and $2.46 billion while the company also stuck to its full-year forecast for revenue in the $10.2 billion to $10.4 billion range. The Street had $2.44 billion and $10.26 billion, respectively.
On a negative note, Baird analyst Justin Kleber points out that although total active users increased by 4% year-over-year to 20.6 million, net adds actually declined by 62,000 sequentially.
That said, the company’s revenue growth outpaced total retail/ ecommerce growth (+11%/+6.5%) while the ongoing “robust” growth in net sales per active customer (NSPAC), and a “significant sequential profitability improvement” are all highlights of a “reassuring” print.
“In short,” said the analyst, “market sentiment for long-duration consumer growth/ecommerce equities could remain challenging near-term amid rising rates; however, with net adds/revenue growth likely to inflect/reaccelerate across 2H, we see favorable longer-term risk/reward with shares at trough valuation.”
Given all of the above, Kleber has high hopes. Along with an Outperform (i.e. Buy) rating, he gives the stock a $45 price target. This target puts the upside potential at 54%. (To watch Kleber’s track record, click here)
What does the rest of the Street make of Chewy’s prospects? It’s a mixed outlook, although with 10 Buys edging out the 7 Holds and 1 Sell, the stock claims a Moderate Buy consensus rating. On where the share price is heading, the outlook is more conclusive; at $52.76, the average target suggests the stock will be changing hands for ~71% premium a year from now. (See Chewy stock forecast on TipRanks)
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Disclaimer: The opinions expressed in this article are solely those of the featured analyst. The content is intended to be used for informational purposes only. It is very important to do your own analysis before making any investment.
