BofA Securities has updated its outlook on Chewy Inc . (NYSE: NYSE:CHWY), raising the price target to $24.00 from the previous $20.00 while maintaining an Underperform rating on the stock.
The adjustment comes in response to Chewy's second-quarter revenue matching Wall Street expectations at $2.86 billion. The online pet retailer's EBITDA for the quarter reached $145 million, surpassing the Street's forecast of $112 million.
The outperformance was attributed to improved gross margins and effective management of selling, general, and administrative (SG&A) expenses.
Chewy's active customer base stood at 20.0 million, consistent with market predictions, and showed a slight quarter-over-quarter increase. Notably, the Net Sales Per Active Customer (NSPAC) saw growth, climbing to $565.
A significant portion of the company's sales, 78.4%, was attributed to its Autoship subscription service, which marked a year-over-year increase of 230 basis points.
The company's gross margin for the quarter was reported at 29.5%, which was higher than the anticipated 28.9% by analysts. The increase was driven by revenue from sponsored ads and a larger proportion of sales in the healthcare sector, which is performing better than expected.
Chewy has also been expanding its veterinary care services, with the opening of two additional clinics in Colorado and Florida, increasing its total clinic count to six.
The report highlighted the company's SG&A expenses, which represented 18.8% of sales. This figure demonstrates a year-over-year improvement of 100 basis points, credited to disciplined corporate payroll management and ongoing investments in automation.
In other recent news, Chewy Inc. has revealed a strong second-quarter performance for the fiscal year 2024. The company reported a 3% increase in net sales, reaching $2.86 billion, and a 6% growth in Autoship customer sales, which now make up 78% of net sales. Chewy's adjusted EBITDA was marked at $145 million, with a gross margin of 29.5%.
The company's strategic initiatives, such as the expansion of Chewy Vet Care clinics and growth of its Sponsored Ads business, have been instrumental in driving this profitability. As for future developments, Chewy has maintained its full-year net sales outlook between $11.6 and $11.8 billion and has upgraded its adjusted EBITDA margin guidance for the year.
InvestingPro Insights
As Chewy Inc. (NYSE:CHWY) continues to navigate the competitive online pet retail market, real-time data from InvestingPro provides a more nuanced view of the company's financial health and stock performance. With a market capitalization of $12.52 billion and a P/E ratio standing at 31, Chewy shows a significant valuation in the current market. The company's price-to-book ratio, as of the last twelve months leading up to Q1 2023, is at 19.48, highlighting a premium valuation compared to its tangible assets.
InvestingPro Tips suggest that Chewy holds more cash than debt on its balance sheet, which could provide financial flexibility and resilience in uncertain market conditions. Furthermore, analysts predict that the company will be profitable this year, echoing the positive sentiment around Chewy's ability to maintain growth and manage its expenses effectively. For readers interested in a deeper dive into Chewy's stock performance and financial metrics, InvestingPro offers additional tips and insights at https://www.investing.com/pro/CHWY.
Chewy's recent stock performance has also been notable, with a significant return over the last week of 9.08% and an impressive six-month price total return of 62.81%. These figures suggest investor optimism and a strong market response to the company's strategic initiatives and operational efficiency. With these insights, investors can better understand Chewy's position and make informed decisions based on the latest market data and expert analysis.
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