On Friday, BofA Securities updated its outlook on Chewy Inc . (NYSE:CHWY) shares, raising the price target to $20.00 from the previous $18.50, while maintaining an Underperform rating.
The adjustment comes ahead of the company's second-quarter earnings report, which is scheduled to be released on August 28 before market open, followed by a conference call at 8:00 am ET.
The firm estimates Chewy's second-quarter revenue and EBITDA to be $2.86 billion and $114 million, respectively. These figures are in line with the consensus and suggest a sales growth of 2.9% year-over-year, marking a slight deceleration from the first quarter.
The EBITDA margin is projected to be 4.0%. The analysis also forecasts Chewy's active customer base to remain steady quarter-over-quarter at 19.9 million, indicating signs of stabilization.
However, the firm notes a potential slowdown in new sales per active customer (NSPAC) growth, which is expected to be 7.0% year-over-year, down from 9.6% in the previous quarter. This could potentially impact revenue trends for Chewy.
The upcoming earnings call is likely to address several key topics including the customer outlook, industry adoption trends, the company’s vet clinics, initial feedback from Chewy Plus — a new loyalty program, sponsored advertisements, and capital returns following a $500 million share buyback program.
BofA Securities highlights risks for Chewy, such as increased competition from retail giants Walmart (NYSE:WMT) and Amazon (NASDAQ:AMZN), as well as a potential downturn in discretionary spending by consumers.
The firm's analysis sets the stage for Chewy's forthcoming earnings report, which will provide investors with more detailed insights into the company's performance and strategic initiatives.
In other recent news, Chewy, Inc. has seen a series of significant developments. The company's revenue tripled, reaching $11 billion, and it reported significant margin expansion. Furthermore, Chewy entered into an agreement to repurchase 17,550,000 shares of its Class A common stock.
Despite these milestones, Argus downgraded Chewy's stock from a Buy to a Hold rating, signaling a more cautious stance. In contrast, William Blair maintained an Outperform rating, expressing confidence in the company's potential for long-term free cash flow.
Wolfe Research initiated coverage on Chewy stock with a Peer Perform rating, citing skepticism about the company's potential to increase its revenue.
Evercore ISI maintained an In Line rating with a consistent price target of $22.00. These are recent developments in Chewy's business operations and strategic initiatives.
InvestingPro Insights
As Chewy Inc. (NYSE:CHWY) gears up for its second-quarter earnings report, investors are closely monitoring the company's financial health and market position. According to InvestingPro data, Chewy's market capitalization stands at a robust $11.55 billion, underscoring the company's significant presence in the e-commerce space for pet products. Despite facing competition from retail behemoths, Chewy's revenue has grown by 7.19% over the last twelve months as of Q1 2023, reflecting its resilience and potential for growth in a competitive market.
InvestingPro Tips highlight that Chewy holds more cash than debt on its balance sheet, providing it with a solid financial foundation to navigate market fluctuations and invest in growth opportunities. Additionally, analysts predict the company will be profitable this year, which could signal a positive outlook for long-term investors. It's noteworthy that Chewy has experienced a significant return over the last week, with a price total return of 11.21%, suggesting that investor sentiment may be shifting positively as the earnings date approaches.
For those seeking a deeper dive into Chewy's financials and market prospects, InvestingPro offers 12 additional tips to help investors make informed decisions. These insights, combined with real-time metrics and expert analysis, can be accessed on the InvestingPro platform, providing a comprehensive toolkit for evaluating Chewy's investment potential.
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