Why E-Commerce Pet Store Giant Chewy (CHWY) Stock is a Buy After Earnings
Chewy CHWY reported its fourth quarter and fiscal 2019 financial results on Thursday, April 2. The e-commerce pet store firm’s sales jumped and its Q1 sales outlook appears strong. Plus, Chewy is well-suited for the current coronavirus economy.
Chewy started in 2011 as an e-commerce-focused pet store that offers speedy delivery in the Amazon AMZN-age. The Florida-based firm sells pet food, supplies and treats for a wide variety of animals. CHWY also sells medications and much more.
Chewy went public in June 2019 and has outperformed the likes of Uber UBER, Lyft LYFT, Peloton PTON, SmileDirectClub SDC, and more over the last six months—up 30%. CHWY shares have also surged roughly 16% in 2020, against the S&P 500’s 21% decline. More recently, Chewy stock has soared nearly 40% since mid-March, with more Americans stuck inside their homes.
Chewy just posted strong Q4 and fiscal 2019 results, with full-year sales up 40% to $4.85 billion. The company also added roughly 3 million customers to close the year with 13.5 million active customers.
CHWY noted that its subscription-style Autoship customers accounted for over 70% of its total Q4 sales. “Higher spending from our existing customers and growing Autoship sales reflect strong business momentum as more customers continue to shift their spending to Chewy, driving increased basket size and higher repeat purchase activity,” CEO Sumit Singh said on the company’s earnings call.
Looking ahead, CHWY expects its first quarter fiscal 2020 sales to climb as high as 37% to reach between $1.50 and $1.52 billion. This comes in above our current Zacks Q1 estimate of $1.45 billion, which would have marked just 31% growth.
CHWY is still firmly in its growth-phase and is currently expected to post adjusted losses in fiscal 2020 and 2021. Plus, executives said on its earnings call that it was not “prudent to provide full-year guidance” amid the economic uncertainty.
That said, Chewy’s positive earnings revisions activity helps it earn a Zacks Rank #1 (Strong Buy) right now. The company also boasts an “A” grade for Growth in our Style Scores system and its Consumer Products - Staples industry rests in top 29% of our more than 250 Zacks industries.
More positive analyst revisions are likely to come in soon on the back of its solid Q1 outlook. Plus, Chewy seems tailor-made for the current coronavirus-economy and beyond. And CHWY stock was down over 4% in morning trading Friday at $33.52 a share, well off its recent highs.
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