JPMorgan analysts remain positive on Chewy Inc (NYSE:CHWY) heading into earnings next week.
What To Know: Chewy is due to report second-quarter financial results before the market opens on Aug. 28. Consensus estimates call for earnings of 3 cents per share on revenue of $2.856 billion, per Benzinga Pro.
In a new note to clients Thursday, JPMorgan analyst Doug Anmuth reiterated an Overweight rating on the stock.
Chewy is the largest pure-play online pet retailer in the U.S., he said.
"We believe pet is a growing and highly attractive category that is early in the shift online (~36% penetration in FY23), and, in our view, Chewy is well positioned as the leader in online pet with a ~33% market share," Anmuth added,
Chewy boasts multiple revenue drivers including secular growth, an ongoing shift to e-commerce, a pharmacy business, and international expansion. "We also note that some of the company's fastest growth areas are its highest margin," the analyst added.
Anmuth noted that approximately 75% of Chewy's net sales come from autoship subscription program customers, which the analyst sees as a key competitive advantage for the online pet care retailer.
Although there are ongoing debates about a softer consumer in the internet sector, the analyst noted that channel checks show Chewy's website visits growth improved in the second quarter and continued to improve into August. Anmuth also believes Chewy's current full-year outlook could prove to be conservative against improving industry trends.
JPMorgan has a December 2024 price target of $28 on Chewy shares based on 18.5 times 2025 adjusted EBITDA. This represents a premium to other online retail competitors trading at around 16 times on average.
"We believe a premium vs peers is warranted now (vs. a slight discount previously) due to improving results with green shoots around industry trends and better execution," Anmuth said.
CHWY Price Action: Chewy shares were down 2.69% at $26.37 at the time of publication, according to Benzinga Pro.
Photo: Pexels from Pixabay.
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