On Thursday, Chewy Inc . (NYSE: NYSE:CHWY) shares experienced a positive shift in market expectations as TD Cowen maintained a Buy rating on the company's stock and increased the price target to $39 from $38. This adjustment comes in the wake of Chewy's third-quarter earnings, which surpassed consensus estimates for both revenue and EBITDA.
According to InvestingPro data, Chewy has demonstrated remarkable momentum with an 81.7% return over the past year, and analysis suggests the stock is currently undervalued.
The online pet retailer reported a 3Q24 revenue of $2.88 billion, a figure that aligns with TD Cowen's estimates and slightly exceeds the consensus of $2.86 billion as well as the company's own guidance, which ranged from $2.84 billion to $2.86 billion. This revenue boost was primarily attributed to a 9.9% year-over-year increase in Autoship customer sales, totaling $2.30 billion and surpassing estimates by 2%.
However, non-Autoship customer revenue did not meet expectations, coming in at $577 million, a decline of 13.4% year-over-year. InvestingPro analysis reveals the company maintains a healthy 29.2% gross profit margin and has achieved a solid 3.7% revenue growth over the last twelve months.
Chewy's earnings were bolstered by growth in all three product categories. 'Other revenue', which includes services like vet care and pharmacy, led the way with a 13.0% year-over-year increase to $538 million for the quarter.
This was followed by Hardgoods, which saw a 4.0% increase to $296.5 million, benefitting from easier comparative figures from the previous year. Consumables, which represent the core of Chewy's offerings, rose to $2.04 billion, marking a 2.9% increase year-over-year.
The company's fourth-quarter guidance presented a mixed picture with revenue forecasts slightly exceeding expectations, while the implied EBITDA was marginally lower than anticipated. This is largely due to increased investments in advertising.
Despite this, the analyst's outlook remains positive, citing the third-quarter beat and favorable comments regarding holiday demand as reasons for the slight increase in estimates and the reaffirmed Buy rating.
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