On Wednesday, Citi reaffirmed its Neutral rating on Chewy Inc . (NYSE:CHWY) with a steady price target of $16.00. The company's first-quarter results surpassed expectations, leading to an upswing in its stock. Chewy's sales marginally outperformed projections, indicating ongoing market share gains within the pet industry. Despite the active customer count not meeting expectations, the company's leadership remains confident that customer numbers will stabilize throughout the year.
Chewy's EBITDA for the quarter exceeded analyst predictions, primarily driven by a significant gross margin (GM) improvement. Moreover, the firm announced its inaugural $500 million share buyback program. Management also shared insights into the pet industry, noting initial signs of increased pet adoption rates, suggesting potential growth on the horizon for the sector.
The positive developments, particularly the raised EBITDA forecast and the announcement of a share repurchase plan, are believed to be the catalysts behind the current strength in Chewy's stock. The market's focus appears to be shifting towards Chewy's profitability rather than its top-line growth, especially after the stock's decline and valuation contraction in recent years.
InvestingPro Insights
Chewy Inc. (NYSE:CHWY) has shown resilience in its latest financial performance, which is reflected in the real-time data from InvestingPro. With a market capitalization of $9.52 billion, the company demonstrates substantial size within the pet industry.
Despite a high P/E ratio of 236.85, indicating a premium valuation, the company's revenue has grown by 10.17% over the last twelve months as of Q4 2024. This growth aligns with Chewy's marginal sales outperformance and market share gains highlighted in the article. Additionally, the gross profit margin stands at a healthy 28.36%, which supports the EBITDA outperformance mentioned.
InvestingPro Tips suggest that Chewy holds more cash than debt on its balance sheet and is expected to see net income growth this year, which may provide investors with confidence in the company's financial health and future prospects.
Still, analysts have tempered expectations with three analysts revising their earnings downwards for the upcoming period, and the stock is trading at high valuation multiples across earnings, EBITDA, and book value. Notably, Chewy does not pay a dividend, which may influence investment decisions for income-focused investors.
For investors seeking a deeper dive into Chewy's performance and potential, InvestingPro offers additional insights, including 5 more tips on the company's financial health and future outlook. To access these tips and enhance your investment strategy, consider using the coupon code PRONEWS24 to get an additional 10% off a yearly or biyearly Pro and Pro+ subscription at InvestingPro.
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