On Thursday, RBC Capital updated its outlook on Chewy Inc . (NYSE: NYSE:CHWY), increasing the price target to $24 from the previous $22 while maintaining an Outperform rating. This adjustment follows Chewy's first-quarter results, which surpassed expectations, particularly in gross margin performance.
Chewy's recent financial outcomes have bolstered investor confidence, as the company not only reported strong gross margins but also showed signs of a turnaround in its category. Moreover, Chewy announced the initiation of its inaugural share repurchase program, marking a significant milestone in its financial strategy.
In light of the positive quarterly report, RBC Capital has revised its forecasts for Chewy's future performance. The firm's new estimates for net sales growth are set at 5.0% for fiscal year 2024 and 6.4% for fiscal year 2025, which is a slight modification from the previously projected 4.5% and 8.4% respectively.
The firm's adjusted EBITDA predictions have also seen an uptick, now standing at $487 million for fiscal year 2024 and $620 million for fiscal year 2025, up from the former estimates of $447 million and $556 million. The raised price target of $24 is based on approximately 15 times the revised fiscal year 2025 adjusted EBITDA estimate of $620 million.
Chewy's positive momentum and strategic financial moves, including the share repurchase initiative, are key factors that contributed to RBC Capital's updated price target and sustained positive outlook on the company's stock.
InvestingPro Insights
Chewy Inc. (NYSE: CHWY) appears to be navigating a notable period in its financial journey. The recent price target increase by RBC Capital is complemented by insights from InvestingPro, which indicate a robust financial position for the company. Notably, Chewy is holding more cash than debt on its balance sheet, a reassuring sign for investors concerned about a company's financial resilience. Moreover, net income is forecasted to grow this year, which could be a catalyst for future stock performance.
InvestingPro data further enriches our understanding of Chewy's valuation and performance. With a market capitalization of $9.37 billion and a high P/E ratio of 88.51, some might argue the stock is trading at a premium. However, this perspective is balanced by the company's strong return over the last week, with a 32.23% price total return, and a notable 43.43% return over the past month. Such impressive short-term performance may align with RBC Capital's optimistic outlook.
For readers looking to delve deeper into Chewy's financials and stock performance, InvestingPro offers additional tips and metrics. Utilize coupon code PRONEWS24 to get an additional 10% off a yearly or biyearly Pro and Pro+ subscription, and discover 14 additional InvestingPro Tips that could help inform your investment decisions in Chewy Inc.
This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.