5 Chewy Analysts On Q2 Earnings: 'Profitability Is No Doubt A Bright Spot'

E-commerce pet care company Chewy Inc CHWY reported second-quarter financial results after-hours Tuesday. Analysts are reacting to revenue coming in below Street estimates and earnings per share beating estimates.

The Chewy Analysts: Bank of America analyst Nat Schindler has a Buy rating and $54 price target.

RBC analyst Steven Shemesh has an Outperform rating and lowered the price target from $59 to $56.

Raymond James analyst Aaron Kessler has a Market Perform rating and no price target.

Needham analyst Anna Andreeva has a Buy rating and $55 price target.

Morgan Stanley analyst Lauren Schenk has an Equal-weight rating and $39 price target.

Related Link: Chewed Up And Spit Out: Why Chewy Stock Is Sliding After Hours

The Chewy Takeaways: Schindler highlighted Chewy beating projections on EBITDA and earnings per share in the second quarter, but sees customer growth under pressure.

One area the analyst sees supporting the bull case for the stock is subscriptions, with autoship sales hitting an all-time high of 73% of net sales.

“We think the continued strength in subscriptions could support revenue as customer growth returns,” Schindler said.

Schindler sees Chewy having lower revenue but higher profitability going forward.

Shemesh said the second quarter results from Chewy were in line, but show some weakness around customer growth.

“The more favorable margin outlook should be enough to keep investors interested while we lap the pandemic-related surge in demand,” Shemesh said. “We think results were good enough and the after-hours move is likely overdone.”

Higher churn from the pandemic time period was a concern in the second quarter for Kessler.

“Strong F2Q execution on margins though softer discretionary spend comes for Fluffy’s treats,” Kessler said.

The analyst noted Chewy’s lower revenue guidance but calls for higher EBITDA going forward.

“Long-term, we remain positive on CHWY fundamentals.”

Andreeva highlighted higher profitability from Chewy in the second quarter and moving forward with higher pricing offsetting inflation.

“Company specific initiatives are resonating (supply chain, FC automation, logistics) and advertising costs are managed tightly,” Andreeva said.

The analyst said Chewy is taking market share from smaller companies and is one of the few producing double digit top-line growth.

Andreeva sees a “compelling” risk-return on shares after the selloff after hours Tuesday.

In a report called “Lady & The Tramp,” Schenk highlights margins from the company. The analyst remains cautious on reduced marketing spending and if the margins are sustainable.

“Bears won out as a weaker top-line outlook and a material lower 2H revenue outlook the bigger surprise are trumping better profitability,” Schenk said. “Profitability is no doubt a bright spot.”

The analyst has been cautious on long-term margins and valuation in recent quarters but feels more confident moving forward.

“We now have greater confidence in a mid-single digit margin over the medium-term which gives the stock more of a valuation floor.”

CHWY Price Action: Chewy shares were down 9.54% at $33.85 Wednesday afternoon. 

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