Chewy Stock Falls After Report - What Wall Street Is Saying

Chewy topped analyst estimates, and a number of investment firms commented on the pet-supplies retailer's quarter.
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Shares of Chewy  (CHWY) - Get Report were falling on Friday even after the pet-supplies retailer reported second-quarter results that topped analyst estimates. 

Shares of Chewy, Dania Beach, Fla., at last check were down 1.8% to $58.62. 

Here's what analysts are saying about the stock. 

Barclays (Equal Weight rating unchanged, PT raised to $60 from $55)

CHWY benefits from durable U.S. pet-market tailwinds and has a good runway for spend per customer and gross-margin expansion. Its predictable model (68% of revenue from autoship) and long-term, defensible moats position the company well. Structurally low gross margin, rising customer-acquisition costs and competitive threats from Amazon  (AMZN) - Get Report are real risks to monitor. Valuation at present appears full.

- Deepak Mathivanan

J.P. Morgan (Overweight rating unchanged, PT raised to $72 from $70)

Chewy is the largest pure-play online pet retailer in the US, with about 16.6 million active customers and 60,000-plus products from more than 2,000 brands. We believe pet is a growing and highly attractive category that is early in the shift online (22% penetration in 2019), and in our view Chewy is well positioned as the leader in online pet with an about 50% market share. Importantly, CHWY’s autoship subscription program customers account for over two-thirds of net sales, which we believe serves as a key competitive advantage that drives strong revenue visibility and differentiated unit economics.

- Doug Anmuth

Morgan Stanley (Equal Weight rating unchanged, PT raised to $49 from $45)

We see CHWY as one of the best positioned Internet small-to-midcap names given 1) the "staple-like" about $100 billion US pet products and services industry CHWY addresses and secular pet ownership growth, 2) its leading online position and expected further brick-and-mortar share losses, and 3) ability to reach profitability due to strong marketing efficiency. However, with the acceleration in new customer growth experienced in the first half now well understood by the market, we think incremental data points from here could be less bullish.

- Lauren Cassel

Wedbush (Outperform rating unchanged, $75 PT unchanged)

CHWY reported second-quarter 2020 results that handily beat sell-side consensus expectations and modestly beat buy-side expectations on the top and bottom lines. Active customer growth of 38% accelerated from 33% in the first quarter and drove the beat. Importantly, this customer growth came with much lower customer-acquisition costs and these new customers are spending more per order than those acquired before the pandemic (at an equivalent time after acquisition) and are otherwise behaving similarly.

- Seth Basham