Online pet supply retailer Soft (CHWY) recently saw an improvement in sales and profits thanks to the recent increase in the number of owners of dogs, cats and other pets. This caused Chewy shares to flirt with a buy point.
X
With expected sales of $10 billion this fiscal year, Chewy is expected to eclipse privately held PetSmart, its former parent company, as the largest pet retailer in the United States, the analyst said. Baird Justin Kleber in a recent note to clients.
“While pets (supplies) was an attractive sector before Covid, the increase in new pet households due to the pandemic should fuel even stronger growth over the next few years,” Kleber said. . He considers Chewy shares to be superior with a price target of 50.
Chewy stock ended the regular trading session on Wednesday at 41.20. Dec. 13, Chewy’s stock hit a point of purchase of 45.83 on a mug-with-handle-base. However, he could not maintain this level and quickly retreated to it. 50 day moving average linea key level of support.
Chewy Stock Jumps After Earnings Report
Dec. On Oct. 8, Chewy released a beat and relaunch report for its third fiscal quarter that ended Oct. 21. 30. Chewy shares jumped 4% on the news.
The Plantation, Fla.-based company earned a penny a share, versus. a loss of 8 cents per share over the prior year period. Sales increased 14% year over year to $2.53 billion in the quarter.
Autoship sales accounted for 73% of company sales in the third quarter. The Autoship Subscription Program sends pet food and other supplies to customers on a regular, scheduled basis.
“Chewy’s third-quarter results showed accelerating double-digit revenue growth, continued gross margin expansion and strong free cash flow generation,” chief executive Sumit Singh said in a statement. a statement. Press release. “The fact that we’re simultaneously driving top line growth and increasing margins is further evidence of our ability to get big fast and get in shape fast, regardless of the macro environment.”
He added, “Our results are a clear indication of the resilience of the pet category and how Chewy’s compelling value proposition of low prices, personalized service and the convenience of on-the-go delivery a wide selection of products, continues to resonate with our customers.”
Millennials, Covid boosts pet adoptions
Chewy had 20.5 million active customers in the third quarter, up 0.6% from the same quarter last year.
Meanwhile, the rise in millennial pet ownership has boosted the pet supplies industry, research firm IBISWorld said in a recent report. The Covid-19 pandemic has prompted many people to adopt pets, analysts say.
The United States now has 188 million cats and dogs, according to IBISWorld. This number is expected to rise steadily to reach 196 million by 2028.
Meanwhile, US pet industry sales totaled $123.6 billion in 2021. That’s a 19.3% increase from the previous year, according to the American Pet Products Association. . Pet food and treats accounted for the largest share of sales at $50 billion, followed by veterinary care and product sales at $34.3 billion.
Analysts are more ‘passive’ on soft stocks
Chewy’s third-quarter report contained many positives, Needham analyst Anna Andreeva said in a report. They included improved gross profit margins and resumed customer growth. Chewy also posted its sixth consecutive quarter of double-digit gains in net sales per active customer, she said.
Additionally, Chewy has gained significant market share by expanding its product line, says Andreeva. The company has doubled its assortment of food products and other supplies over the past two to three years. It has also expanded into the pet health, insurance and veterinary care markets. Andreeva views Chewy stock as a buy with a price target of 55.
Evercore ISI analyst Mark Mahaney said Chewy’s third-quarter earnings report made him “increasingly ‘attentive'” to the company’s outlook. He rates Chewy’s stock as superior with a price target of 55.
In a note to customers, Mahaney said he sees Chewy’s profit margins improving in 2023 as supply chain challenges and cost inflation abate. Chewy is also shifting its business toward higher-margin products and services, he says.
Chewy predicts a decrease in deceleration
A point of caution, however, concerns the company’s revenue forecast for the fourth quarter, Mahaney said. The midpoint of its sales forecast suggests 10.5% year-over-year growth. This would be a deceleration compared to the third quarter.
The company’s guidance is a sign that “nothing is truly recession proof, not even treats for Fluffy,” he said.
Shares of Chewy rank sixth out of 60 stocks in IBD’s internet retail industry group, according to IBD Stock Check. He has a IBD Composite Rating out of 73 out of 99.
The IBD Composite Rating is a mix of key fundamental and technical measures to help investors assess a security’s strengths. The best growth stocks have a composite rating of 90 or higher.
Chewing broth has a ITN Accumulation/Distribution Rating of B, indicating the institutional purchase of shares. He has a IBD Relative Strength Rating out of 85 out of 99. The Relative Strength Rating shows how a stock’s price performance compares to that of all other stocks over the past 52 weeks.
Follow Patrick Seitz on Twitter at @IBD_PSeitz for more stories on consumer technology, software and semiconductor stocks.
YOU MIGHT ALSO LIKE:
Learn to Time the Market with IBD’s ETF Market Strategy
Find today’s top growth stocks to watch with the IBD 50
IBD’s Long-Term Leaders Highlight the Best Long-Term Stocks
See stocks on the leader list near a buy point
Find winning stocks with MarketSmith pattern recognition and custom screens
0 Comments