Baird Raises Chewy’s Price Target Amid Customer Growth

Chewy's stock price (NYSE: CHWY) was a notable gainer on Wednesday, adding 11.06% on the day, to bring 1 month cumulative gains to 17.75%. This surge comes as earnings came in above expectations, and Baird are one of those analysts to have raised its price target from $32 to $35, maintaining an Outperform rating on the stock.

Baird's decision reflects stronger-than-expected financial performance by Chewy. The firm acknowledges the company's successful beat on expectations, owing to impressive flow-through. Despite sales aligning with forecasts, the sequential improvement in active customers was significant enough to motivate Baird's confidence in foreseeing a substantial uptick in customer growth next year.

Revenue came in broadly in line with expectations at at $2.86 billion, where EPS of $0.24 outpaced the consensus of $0.21 by 14%.

The company's initiatives targeted at pet households and specific growth strategies are gaining traction. This momentum, combined with sustained progress in profitability and free cash flow, indicates that there may be more room for sentiment to improve.

Headquartered in Plantation, Florida, Chewy operates vigorously within the Consumer Cyclical sector, leading the pack in Internet Retail. Founded in 2010, it specialises in offering pet-related products, such as food, supplies, medications, and other health products mainly through its e-commerce platform.

Chewy currently holds a market cap of approximately $12.52 billion, with a 52-week low of $14.68 and a 52-week high of $39.10.

Presently, the average price target for Chewy is $28.72, and the consensus analyst recommendation stands at a ‘buy' with an average rating of 2.3. This is supported by 21 analyst opinions objectifying the potential growth trajectory of Chewy.

The upward revision of Chewy's price target by Baird underscores a robust vote of confidence in the company's growth potential and is now the leading mark on the street. The company's strategic positioning and innovative approaches to enhancing customer engagement and growth are the primary factors underlying Baird's optimism. The firm indicated a strategy of buying on dips, advocating for capitalizing on short-term price fluctuations following the stock's recent climb but you will want to ensure you do your own due diligence.

Whilst one analyst may be bullish, the bear case also warrants consideration to see which most aligns with your own view. Without doubt, a very strong day for Chewy, and we will be watching interested in what comes next.