Tuesday, Mizuho initiated coverage on Chewy Inc . (NYSE:CHWY) with a Neutral rating and a price target (PT) of $18.00. The firm provided a cautious short-term outlook for the online pet retailer, despite a positive view on the company's long-term potential in the expanding pet industry.
Mizuho's position is based on the belief that Chewy will continue to grow its share in the over $140 billion pet market and build a more comprehensive ecosystem. However, the firm anticipates a period of slower revenue growth in the near term, projecting a 5% increase for the 53-week fiscal year 2024 compared to a higher single-digit percentage growth rate previously expected by the market.
The analysis highlighted several factors contributing to the conservative outlook, including a decline in pet ownership, stagnant active customer numbers, and continued price disinflation. These trends are expected to keep Chewy's stock performance at current levels until there is clear evidence of sustained growth and new customer acquisition.
Mizuho's assessment indicates that Chewy's shares may not see significant movement until there is definitive proof that the company's revenue growth has reached its lowest point and that the customer base is expanding once again. The firm does not currently see enough data to support a more optimistic short-term forecast for Chewy.
InvestingPro Insights
As Mizuho provides a neutral stance on Chewy Inc. (NYSE:CHWY), citing challenges in the short-term outlook, InvestingPro data and tips offer additional context for investors considering the company's future prospects:
InvestingPro data highlights a significant Market Cap of $7.26 billion, which reflects the scale of Chewy's operations within the pet industry. Despite the concerns raised by Mizuho, the company's Revenue Growth over the last twelve months as of Q3 2024 stands at a healthy 12.56%, indicating its ability to increase sales in a competitive market. However, the Price / Book ratio as of Q3 2024 is at 18.42, suggesting that the stock may be trading at a premium compared to the company's book value.
Among the various InvestingPro Tips, two are particularly noteworthy in light of Mizuho's analysis: Chewy is expected to see its net income grow this year, which could signal a turnaround from the slower revenue growth anticipated by Mizuho. Moreover, despite recent performance, analysts predict that the company will be profitable this year, providing a potential upside for investors looking beyond immediate headwinds.
For those looking to dive deeper into Chewy's financials and future outlook, InvestingPro offers 6 additional tips that could further inform investment decisions. To access these insights and more, visit: https://www.investing.com/pro/CHWY. Plus, use coupon code PRONEWS24 to get an additional 10% off a yearly or biyearly Pro and Pro+ subscription.
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