Has Chewy Stock hit rock bottom? In search of the silver lining

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No being is spared from the setbacks of the supply chain, including pets. Or perhaps more accurately, pet product sellers are also feeling the brunt of current supply constraints.

This was evident in the latest report on the results of Soft (CHWY). The company said it was seeing “strong demand,” but the aforementioned headwinds were behind the below-average performance. Investors showed little sympathy, however, turned around and disappeared through the cat flap in the following session.

The company missed both revenue and net income. Although revenue increased 17.2% year over year to $2.39 billion, the figure is below the indicative range of $2.4 billion to $2.44 billion , while also falling short of the Street’s forecast of $2.42 billion.

The company also posted a third straight quarterly loss as EPS of -$0.11 missed consensus expectations of -$0.08.

Completing the triptych of disappointment, the outlook was also disappointing. For the April quarter (FQ1), Chewy forecasts revenue between $2.4 billion and $2.43 billion; Wall Street was looking for $2.51 billion. And for the full year, sales are expected to be between $10.2 billion and $10.4 billion, also below the consensus estimate of $10.6 billion.

Reviewing the print, Jefferies’ Stephanie Wissink admits she misread the company’s positioning in the current environment. However, the analyst is still on Chewy’s side.

“We got the stock wrong as growth fell from 20% to mid-years % and the market discount increased,” the analyst explained. “We see half of the revision as transitory and the other half as structural. Our thesis still clings to +DD% growth, looks beyond Q1 into the Q2 normalization period and rolling out of high-margin value streams, including: advertising platform, membership fee model, and service marketplace.”

As a result, Wissink is sticking to a Buy rating, although the price target is lowered from $90 to $60. Nonetheless, the figure still implies an upside potential of around 41% from current levels. (To see Wissink’s track record, Click here)

Overall, most analysts remain in CHWY’s corner but not all are convinced; the consensus moderate buy rating for the stock is based on 10 buys, 6 holds and 1 sell. There are still some decent gains projected here; at $64.5, the average price target indicates that the stock will rise about 49% over the one-year period. (See Chewy’s 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.


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