Chewy’s 4Q Revenues Outshine Estimates; Stock Pops Over 10%

Shares of Chewy were up 10.5% in Tuesday’s extended trading session after the online retailer of pet food and other pet-related products reported better-than-expected revenues in the fourth quarter.

Chewy’s (CHWY) 4Q revenues of $2.04 billion grew 51% year-over-year and beat consensus estimates of $1.96 billion. The company’s gross margin expanded 190 basis points to 25.5%, while the adjusted EBITDA margin improved 290 basis points to 1.2%.

The company’s CEO Sumit Singh said, “we grew net sales by 47 percent year over year, increased our customer base by 43 percent year over year, delivered our first full year of positive adjusted EBITDA, and generated the company’s first quarter of positive net income in the fourth quarter of 2020.” He added, “Years of preparation and focus have positioned us as the Internet’s preeminent neighborhood pet store and a leading pure-play e-commerce company in the pet space.” (See Chewy stock analysis on TipRanks)

Ahead of 4Q results, Wells Fargo analyst Brian Fitzgerald reiterated a Buy rating and a price target of $120 (49.3% upside potential). In a note to investors, the analyst said, “We expect a strong quarter, driven by Active Customer momentum (we forecast 18.8MM, +40% YY growth), Autoship, and expanding gross margin (we forecast 24.7% in 4Q, +170 bps YY).”

Fitzgerald added, “Despite 3Q strength, our positive view on 4Q and evidence that CHWY’s online dominance continues vs. pureplay competition (Petco/Petsmart)—per SimilarWeb, CHWY maintains 3x monthly unique visitors and website visits, and deeper engagement (CHWY visitors shop/browse longer), CHWY shares have entirely retraced the post-3Q rally, presenting an attractive entry point in our view.”

Overall, the Street has a Moderate Buy consensus rating on the stock based on 5 Buys, 3 Holds and 1 Sell. The average analyst price target of $98 implies upside potential of about 21.9% to current levels. Shares have gained about 122.3% in one year.

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