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Chewy Stock Gets Analyst Support After Results Miss Estimates

Chewy is still 'a secular winner' despite the disappointing second-quarter results, one analyst says.

Analysts were remaining loyal to Chewy  (CHWY) - Get Chewy, Inc. Class A Report, even as several cut their share-price targets after the online pet food retailer's second-quarter results fell short of Wall Street's expectations.

Shares of the Dania Beach, Fla., company were in the doghouse with investors, at last check falling 8.6% to $79.88.

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Chewy posted a loss of 4 cents a share on sales of $2.16 billion, while analysts were expecting a loss of 2 cents a share, on sales of $2.2 billion.

"Despite these dynamics, we note still healthy gross customer adds, which continue to run higher than prepandemic levels, as well as stable retention rates," Credit Suisse analyst Katie Tryhane said in a research note. 

Tryhane has an outperform rating and $121 price target on the shares.

She said that net sales per active customer "meaningfully accelerated from a growth perspective (vs. the fiscal first quarter) and should remain strong over the balance of the year as the 2020 cohort continues to mature and as CHWY expands its offerings."

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William Blair analyst Dylan Carden also noted Chewy's accelerating growth in net sales per active customer. He said that highlights the steady increase in wallet share the company has captured over its customers' lifetimes without any material investment in retention.

Carden, who affirmed his outperform rating, recommended buying shares of Chewy on weakness, saying he saw a "decades-plus runway" for growth with Chewy the "primary share taker of online pet spend migration."

Wedbush analyst Seth Basham reiterated his outperform rating on the shares, while trimming his price target to $90 from $100, saying he still saw Chewy as "a secular winner" but was "incrementally less bullish."

Basham noted that "due to the surge in customer growth in 2020, elevated customer attrition should persist through the balance of 2021."

"CHWY should benefit from customers continuing to expand wallet share at CHWY as the company adds more products and services and even as spending on hard goods grows more slowly as consumer mobility increases," the analyst said.

Should the Covid-19 delta variant drive resurgent stay-at-home trends, Basham said, Chewy "should benefit more, with indications of online pet category shopping reaccelerating in late July and August."

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