June 26, 2022


Chewy surprised everyone with better than expected results. The revenue was up by 13.7% YoY and came at $2.43 billion against the estimate of $2.41 billion. The main positive indication was in the bottom line growth which was reported at $0.11 profit per share

June 20th

CHEWY Stock Forecast: Latest Price of CHEWY

CHEWY Stock Forecast: Bull Case

  • Better Financial First Quarter Results – There is pessimism in the global stock market and every other company is coming up with bad fiscal quarter results. Similar was the case with the Chewy Inc going into the announcement of first quarter results on 1st June 2022. But, Chewy surprised everyone with better than expected results. The revenue was up by 13.7% YoY and came at $2.43 billion against the estimate of $2.41 billion. The main positive indication was in the bottom line growth which was reported at $0.11 profit per share against the expectation of $0.04 loss. The main reason for the improved results is net sales per active customer which came at $445 – an increment of 15% from the last year.
  • Better Customer Experiences– There are number of reasons of why Chewy could post these better expected results. Over the last year, the number of active customers have increased 4.2% to 20.6 million. Also, it has been observed that customer do spend in greater amount as they spend time with the Chewy. The first year spending of customer is about less than $250, which increases to about $700 in the fifth year. Company was able to better the experience of customers through improved supply chain and reduce cost simultaneously. 

CHEWY Stock Forecast: Latest Video

CHEWY Stock Forecast: Latest Tweets

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CHEWY Stock Forecast: Bear Case 

  • No return since debut on the stock market – Although, last fiscal quarter results are good, but the fact remains that Chwy stock has not given any return since its inception on NYSE on 14th June 2019. In last three years, stock is down by 17.06% (as of 15.06.2022) and that should be disheartening for investors. In last one year, stock is down by about 60%, from a high of $74 on 15th June 2021. Chewy is an online retailer of pet foods and other pet related products. This is kind of products which comes under supplementary spending and hence in the environment of higher inflation rates, the revenue dropped for the company and hence the stock price. It is still recovering from the recent falls and there seems to be more pain ahead for the company and the stock. 

Conclusion

Chewy Inc is a company on the right path. They have tackled the supply chain issues in a better way in the last quarter, which helped them to price their products in a better way and hence increase the gross margin and revenue significantly. Chewy gross margin increased 210 basis point in the last quarter sequentially. Also, the pet product market is expanding, and is expected to be $93 billion by 2025 compared to $60 billion in 2015. Most importantly, Chewy is trading at only 1.1 times sales at the current share price which is relatively low as compared to other e commerce companies and S&P sales multiple of 2.6. It is recommended that watch Chewy quarter financial results for few quarters and if they report profit consistently, it is a buy for sure. 

Questions and Answers 

Q-1 Why is Chewy stock dropping?

Ans – Chwy stock is down by about 45 percent in last six months and is 62 percent down in last one year (as of 16.06.2022). There are ample reasons, but the primary reason being that the last fiscal year financial results were not at par with the expectations. For fiscal year 2021, the net revenue came at $8.89 billion, which was up by 24%, but its missed the lower end of management estimates slightly by $10 million. Various Wall Street Analysts cut their price targets, for example Jefferies analyst downgraded the target price to $60 from $90. 

Also, another factor for downfall for the stock is that the company is hit hard by inflation, resulting into the drop of gross margin for the fourth quarter and full fiscal year 2021. The decline in the operating margin is also due to increased expenditure, as the company is investing back huge sum of money on its own business. Company’s capital expenditure increased to $183 million. 

However, things are changing around in 2022 for the Chewy Inc. The revenue also bet the expectations and more importantly, gross margin has improved significantly in the last quarter. Indeed, the Chwy stock has fallen by about 45 percent in last six months, but the fall will be restricted if the company continues to deliver better than expected results. 

Q-2 Chewy stock chart- Chwy Technical Analysis: –

Screenshot 2022 06 20 5.15.00 PM 1

Above chart shows the share price for Chewy Inc for last one year. The stock has fallen from a high of $87 on 1st April 2022 to $22 on 24th May 2022. Going forward, there are multiple resistances and the upside journey is not going to be easy. But, $22.45 is the next support in the current downtrend. Resistances are also marked in the chart. The first resistance is going to be at $52.17 and if stock is able to cross that level, $61 will act as next resistance. $ 80 is the next very strong resistance shown in the chart. 

We have to understand that stock is fallen considerably in the past six months and any relief rally on the upside will be hindered by equivalent sell off. But on June 15th 2022, stock went up by 8.10% for a start. This is the after effect of the better than expected fiscal quarter results by Chewy Inc on 1st June 2022. In last one month, the stock is up by 10%. If the company can continue to deliver better than expected results, the stock can regain the lost ground. 

Read also : Tesla Stock Forecast

Vineet Agarwal

Note: Crowdwisdom360 collates Predictions and data from all over the net and has no in-house view on the likely trends in the Stocks or Crypto Coins. Please consult a registered investment advisor to guide you on your financial decisions.



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