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On Thursday, BofA Securities changed its position Chewy Inc . (NYSE:), reducing the price target to $16.50 from the previous $17.00, while maintaining an Underperform rating on the company’s shares.
The adjustment follows Chewy’s latest financial results, which included fourth-quarter revenue and EBITDA that beat Wall Street expectations. Chewy reported revenue of $2.83 billion and EBITDA of $86 million, compared to analyst projections of $2.79 billion in revenue and $65 million in EBITDA.
Despite improving revenue and EBITDA, Chewy saw a decline in active customers, down 1.5% year-over-year, losing approximately 170,000 customers quarter-over-quarter. Nonetheless, the company posted notable 11.8% growth in net sales per active customer (NSPAC) to $554, which surpassed the Street estimate of $547. This increase is partly attributed to business expansion Chewy’s Health.
Chewy’s Autoship program, which allows for automatic reordering of products, accounted for 76.4% of total sales, marking an increase of 310 basis points from the previous year and remaining stable compared to the third quarter. The company’s gross margin came in at 28.2%, a slight year-over-year increase of 10 basis points and 20 basis points higher than BofA Securities’ estimate. Gross margin growth was supported by continued growth in sponsored ads revenue, which is expected to increase further in 2024.
Despite favorable gross margin and revenue numbers, Chewy’s EBITDA margin contracted 30 basis points year over year to 3.1%. This contraction was primarily due to increased investments in selling, general and administrative (SG&A) expenses, which led to a decrease in financial leverage. Chewy’s financial performance and target price adjustments reflect the company’s current market position and the challenges it faces in a competitive industry.
Insights on InvestingPro
As Chewy Inc. (NYSE:CHWY) navigates a competitive market landscape, its financial health and growth prospects continue to be a focus for investors. With a market capitalization of around $7.65 billion, the company’s valuation metrics present a mixed picture. Chewy’s price-to-earnings (P/E) ratio stands at an impressive 651.85, indicating a high earnings multiple that could suggest investor optimism about future growth or potentially overvaluation relative to earnings.
InvestingPro data shows Chewy’s revenue grew 12.56% over the trailing twelve months as of the third quarter of 2024, a good sign of revenue expansion. However, the company’s EBITDA margin remains slim at 0.11%, reflecting competitive pressures and significant investments in growth and operations. A notable highlight is the company’s gross profit margin, which maintained a solid 28.33%, in line with the recent increase in gross margin reported in the latest results.
One of InvestingPro’s takeaways that stands out is Chewy’s strong cash position, which holds more cash than debt on its balance sheet, which could provide a cushion against market uncertainties and allow for continued investment in strategic areas like the Autoship program and the expansion of the healthcare business. Another tip to consider is analysts’ expectation that Chewy will be profitable this year, which, if realized, could positively influence stock performance and investor sentiment.
For investors looking for a more in-depth analysis, there are additional tips from InvestingPro that could provide further insight into Chewy’s valuation and performance. For example, the platform notes that Chewy trades at a high price-to-book multiple of 19.45 and a high EBIT valuation multiple, which could be important factors for valuation-sensitive investors. To access these insights and more, visit InvestingPro’s dedicated page for Chewy at https://www.investing.com/pro/CHWY and consider using the coupon code PRONEWS24 to get an additional 10% discount on the annual or biennial Pro and Pro+ subscription. There are 10 more tips from InvestingPro that could help you make an informed investment decision.
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