Last Updated: 17 Sep 2024
Executive Summary
Chewy Inc. (CHWY) is a leading e-commerce retailer specializing in pet supplies in the United States. The company has experienced strong growth in recent years, driven by increasing pet ownership and the convenience of online shopping. However, the stock has underperformed the broader market in 2023 due to concerns about rising costs and competition. Despite these challenges, analysts remain bullish on Chewy's long-term prospects, citing its strong brand, loyal customer base, and growth potential in the pet industry.
Company Overview
Chewy was founded in 2011 and has grown rapidly to become one of the largest online retailers of pet supplies. The company offers a wide range of products, including food, treats, toys, and accessories, for dogs, cats, fish, birds, and reptiles. Chewy also provides a subscription service that allows customers to receive regular deliveries of essential pet supplies.
Fundamental Analysis
Revenue: Chewy's revenue has grown significantly in recent years, from $3.5 billion in 2019 to $11.3 billion in 2023. The company's revenue growth has been driven by increasing pet ownership, the convenience of online shopping, and Chewy's expanding product offerings.
Earnings: Chewy's earnings per share (EPS) have also grown in recent years, from $0.15 in 2019 to $0.83 in 2023. However, the company's profit margins have been squeezed in recent quarters due to rising costs and increased competition.
Valuation: Chewy's stock is currently trading at a trailing price-to-earnings (PE) ratio of 38.53, which is above the average PE ratio for the retail sector. However, Chewy's growth prospects and strong brand justify its premium valuation.
Technical Analysis
Trend: Chewy's stock price has been in a downtrend since reaching a 52-week high of $39.1 in November 2022. The stock has broken below its 50-day and 200-day moving averages, indicating that the downtrend is likely to continue in the near term.
Support and Resistance: The stock price is currently finding support at around $30.4, which is the analyst target price. Resistance is located at around $35, which is the stock's 50-day moving average.
Momentum: The relative strength index (RSI) is below 50, indicating that the stock is oversold and could be due for a bounce.
Short Term Outlook
In the short term, Chewy's stock price is likely to remain under pressure due to concerns about rising costs and competition. The stock could test support at $30.4 in the coming weeks. However, a bounce could occur if the stock can break above resistance at $35.
Long Term Outlook
In the long term, Chewy's prospects remain bright. The company has a strong brand, a loyal customer base, and a growing market opportunity. Chewy is well-positioned to continue to grow its revenue and earnings in the years to come.
Analyst Recommendations
Analysts are generally bullish on Chewy's long-term prospects. Six analysts have a "Strong Buy" rating on the stock, 10 have a "Buy" rating, 12 have a "Hold" rating, 2 have a "Sell" rating, and 0 have a "Strong Sell" rating. The average analyst target price is $30.4.
