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Chewy Drops as Needham Initiates With Hold Rating

Chewy shares fell after being initiated with a hold rating at Needham.

Shares of pet food delivery company Chewy Inc.  (CHWY) - Get Chewy, Inc. Class A Report were falling sharply Thursday after Needham analyst Anna Andreeva initiated coverage of the company with a hold rating.

Shares of Chewy were falling 4.2% to $80.15 at last check. 

Last month, Chewy swung to a surprise fiscal-first-quarter profit from a year-earlier loss on 32% higher revenue.

Chewy reported, however, that supply constraints left it out of stock of some products, hurting the quarter's revenue.

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For the quarter ended May 2, the Dania Beach, Fla., company earned 9 cents a share compared with a loss of 12 cents a share in the year-earlier quarter.

Revenue reached $2.14 billion from $1.62 billion.

A survey of analysts by FactSet produced consensus estimates of a GAAP loss of 3 cents a share on revenue of $2.12 billion.

The initiation was part of a note that initiated other e-commerce plays like RealReal  (REAL) - Get RealReal, Inc. Report, ThredUp  (TDUP) - Get ThredUp Report, Etsy  (ETSY) - Get Etsy, Inc. Report and  (OSTK) - Get, Inc. Report with buy ratings. 

Adreeva notes that the group trades at enterprise value to sales and enterprise value to gross profit premiums on her 2022 estimates, which is warranted due to her expectation for 27% sales growth in the next two years. 

"While OSTK fits the basket of COVID winners (sales +74% last year), sales on average were flat for the five years preceding 2020, so multiyear stacks aren’t difficult," she said. "OSTK’s two-year sales run rate in first quarter 2021 improved by about 20 points, and the company’s second-quarter 2021 guidance for flat sales embeds additional acceleration."