Chewy Stock Adjusts to New Ratings as Analysts Set Mixed Expectations

Despite bouncing 4.4% to end last week on a high, the Chewy share price (NYSE: CHWY) is still down 25.6% YTD. We take a look at what is happening at CHWY.

The online pet product retailer known for its vast assortment of pet food, supplies, and services, has experienced significant shifts in its stock price since splitting from PetSmart in 2019 after going public.

Launching at $22 during its initial public offering, Chewy's shares soared to a record high of $118.69 in February 2021, driven by heightened demand during the early stages of the COVID-19 pandemic. However, the tide has turned for the e-commerce giant, with its stock now hovering around $17, a stark contrast to its peak performance just two years prior.

Much of Chewy's initial growth can be attributed to the pandemic, which accelerated the transition of pet owners towards online shopping. In fiscal 2020, the company saw a notable spike in active customers, net sales per customer, and total net sales. However, the subsequent decline in active customers post-pandemic has led the company to pivot towards new strategies to maintain its market position and profitability.

To counteract the reduction in customer growth, Chewy has turned its focus to boosting higher-margin areas of its business. This includes an emphasis on promoting private label products, which tend to have a better profit margin compared to third-party goods, alongside selling more advertisements on its platform. Furthermore, Chewy has been expanding its Chewy Health services and insurance plans, while also encouraging more customers to enroll in their Autoship subscription service, which offers convenience and regular income to the retailer.

In a fluctuating market, analysts are reassessing their positions on Chewy Inc (NYSE: CHWY). Notably, Jefferies Financial Group has made a conspicuous change by lowering its price target on Chewy from $27.00 to $25.00, albeit maintaining a “buy” rating on the stock. This adjustment reflects a nuanced view of the e-commerce pet supplier's potential in a competitive online retail landscape.

On the more optimistic front, Barclays has upgraded their outlook on Chewy from “equal weight” to “overweight,” a move that signals confidence in the company's ability to outperform the broader market. Alongside the upgrade, Barclays has increased their price target from $19.00 to $30.00, suggesting potential undervaluation at current trading prices.

CHWY Insider Activity

In the midst of these adjustments by prominent financial institutions, Chewy's CEO Sumit Singh has notably sold 192,642 shares of company stock at the average price of $17.70, culminating in a transaction valued at approximately $3.41 million. Such insider trading activities can often serve as a signal to the market about leadership's perspectives on the company's valuation.

Investors are also weighing in on Chewy's recent performance, with the stock trading at a 12-month low of $15.65 and reaching a high of $40.78. The broad range demonstrates the stock's volatility and the shifts in investor sentiment over the past year.

The market capitalization of Chewy stands at $7.08 billion, with a price-to-earnings (P/E) ratio that is relatively high at 205.15, coupled with a beta of 0.92, indicating less volatility than the broader market. These figures will be critical points of analysis for investors considering the stock's earning potential and sensitivity to market changes.

Institutional investment in Chewy remains substantial, with institutions and hedge funds holding a staggering 98.28% of the company's stock. This level of institutional ownership may provide a degree of stability and confidence for retail investors.

Within the operational scope of the business, Chewy continues to solidify its presence in the U.S. e-commerce space, offering an array of pet food, supplies, medications, and other pet health products.