Chewy, Inc. (NYSE: CHWY) is an e-commerce American retailer selling pet-related products. Its products include pet medication, food, treats, and pet-health products. The company offers pet products, such as cats, service dogs, birds, reptiles, fish, horses, and small pets. It went public in 2019, and its headquarters are in Plantation, Florida.
Chewy, Inc. Stock Performance
Chewy (CHWY) stock has been underperforming recently. In the past six months, the stock is down -50.22%. It is also down -48.34% year-to-date. In the last trading session, CHWY stock saw a +5.17% rise. However, the stock is down -0.49% in pre-market trading on December 4, 2023.
The downside trend is despite the company being profitable. However, it is barely profitable and does not issue dividends. Instead, it re-invests most profits into the business. The company reported increased consumer spending in its most recent earnings report.
Despite the rise in sales, the stock has performed dismally in recent years. Its stock reached its all-time high during the pandemic, with each share trading at $118.69 in February 2021. However, the stock has since tumbled.
Earnings Report
In its most recent Q2 earnings report, the company reported a revenue of $2.78 billion with an EPS of $0.15. At the time, the company beat EPS estimates by 58.80% and revenue estimates by 0.60%. In the past four quarters, it has surpassed EPS estimates 75% of the time.
Its reported revenue was up 14.3% year-over-year. That showed it was gaining a foothold in a sector dominated by industry giants Walmart and Amazon. However, its net income fell slightly to $18.9 million in the quarter.
While the report was overall positive, there were warning signs that overall macroeconomic pressure was getting to them. For instance, Chewy reported that its customer base shrank 0.6% year-over-year and was 20.4 million in Q2. Another possible reason is the decline in pet ownership. During the pandemic, many people were into the pet ownership trend. However, the trend has since declined.
While the company posted a profit, spending on advertising and marketing is quite small. The segment accounted for 6.7% of revenue in Q2. One reason is the company’s auto-ship program, which lets customers sign up for periodic shipments.
While Chewy is profitable, it’s not spending much on advertising and marketing. Advertising and marketing accounted for just 6.7% of revenue in Q2.
In its outlook section, the company projects revenue will rise 8%-9% in Q4 year-over-year. For the full year, Chewy projects revenue will rise 10%-12%.
Chewy (CHWY) Stock Forecast
Major analysts have recently downgraded their price target for CHWY stock. For instance, a renowned investment bank, Piper Sandler, recently downgraded its price target from $29 to $21. JPMorgan Chase & Co reported in August also downgraded the stock’s price target from $56 to $48. Wedbush followed suit in October and downgraded its price target to $31.
Overall, stock analysts give CHWY stock a moderate buy rating. Their lowest price target is $16, and the highest is $52. The stock’s average price target is $34.43. Its average price target is an 87.84% increase on the current price of $19.66.
Should you Buy Chewy Stock?
Despite posting impressive numbers in its most recent earnings report, Chewy stock is struggling. CHWY is down -48.34% year-to-date, and there is no sign of a change soon. In its most recent report, the company reported it was losing customers. Consequently, it might have to ramp up spending to ensure continued growth.
In the future, its profit may decline as it faces pressure to prevent a shrinkage of the customer base. However, sales are still growing. Investors will no doubt be waiting for its Q3 numbers scheduled for release on December 6, 2023. However, the moderate buy rating by analysts is accurate based on the company’s performance.
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