Get 40% Off
🤯 This Tech Portfolio is up 29% YTD! Join Now to Get April’s Top PicksGet The Picks – Just 99 USD

Chewy Stock Plunges 15% on Weak Results and Guidance, Analysts Remain Optimistic

Published 30/03/2022, 11:38
Updated 30/03/2022, 11:38
© Reuters.

© Reuters.

Shares of Chewy (NYSE:CHWY) are down nearly 15% in premarket trading Wednesday after the company reported worse-than-expected Q4 net sales and Q1 guidance.

Chewy reported fourth-quarter net sales of $2.39 billion, up 17% YoY and below the analyst consensus of $2.42 billion. The company reported an adjusted EBITDA loss of $28.1 million, compared to a $60.8 million profit in the year-ago period and an expected loss of $73,000.

The number of active customers in the quarter was reported at 20.7 million, missing the consensus projection of 20.9 million. Net sales per active customer came in at $430, just above the analyst expectations of $429.61. Chewy reported a Q4 gross margin of 25.4%, compared to 27.1% in the year-ago period and consensus estimates of 26.2%.

For the first quarter, the retailer of pet-related products expects net sales in the range of $2.4 billion to $2.43 billion, missing the analyst estimates of $2.51 billion. For the full year, Chewy expects net sales to range from $10.2 billion to $10.4 billion, below the consensus projection of $10.79 billion.

The company expects the FY2022 gross margin to be in line with the FY2021 gross margin.

Our ability to deliver 24% net sales growth in 2021, on top of the outsized growth we delivered last year, reflects the durability of our business and the Pet category beyond the near-term benefits of the pandemic, and is a strong testament to Chewy's ability to execute in the face of rapidly evolving macro conditions, CEO Sumit Singh said.

BofA analyst Nat Schindler lowered the price target to $108.00 per share, down from the prior $133.00 following as earnings suggest the company is suffering a growth slowdown in the first half of this year. Still, Schindler remains Buy-rated as he likes the long-term Chewy story.

We continue to see Chewy's subscription-driven model and recession-resistant segment as appealing and sustainable heading into a post-pandemic world. We reiterate our Buy rating and shift our valuation model by a year to FY23, Schindler said in a client note.

Raymond James analyst Aaron Kessler echoed Schindler's comments.

Long-term, we remain positive on CHWY fundamentals given: 1) the significant shift in pet care spending to the digital channel; 2) predictable customer economics; and 4) our expectation for 15%+ long-term revenue growth and 5-10% long-term EBITDA margins (vs. ~1% in FY21). That said, we believe shares are fairly valued at ~7.5x FY22 EV/Gross Profit and believe that risk/reward is balanced at current levels, Kessler wrote in a memo to clients.

By Senad Karaahmetovic

Latest comments

Risk Disclosure: Trading in financial instruments and/or cryptocurrencies involves high risks including the risk of losing some, or all, of your investment amount, and may not be suitable for all investors. Prices of cryptocurrencies are extremely volatile and may be affected by external factors such as financial, regulatory or political events. Trading on margin increases the financial risks.
Before deciding to trade in financial instrument or cryptocurrencies you should be fully informed of the risks and costs associated with trading the financial markets, carefully consider your investment objectives, level of experience, and risk appetite, and seek professional advice where needed.
Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. The data and prices on the website are not necessarily provided by any market or exchange, but may be provided by market makers, and so prices may not be accurate and may differ from the actual price at any given market, meaning prices are indicative and not appropriate for trading purposes. Fusion Media and any provider of the data contained in this website will not accept liability for any loss or damage as a result of your trading, or your reliance on the information contained within this website.
It is prohibited to use, store, reproduce, display, modify, transmit or distribute the data contained in this website without the explicit prior written permission of Fusion Media and/or the data provider. All intellectual property rights are reserved by the providers and/or the exchange providing the data contained in this website.
Fusion Media may be compensated by the advertisers that appear on the website, based on your interaction with the advertisements or advertisers.
© 2007-2024 - Fusion Media Limited. All Rights Reserved.