Chewy Gains New Customers, Heads For A Positive Inflection, Says Bullish Analyst

Shares of Chewy Inc CHWY rose in early trading on Wednesday, after being a heavily shorted stock last month.

The Boston-based e-commerce site for pets is poised for a positive inflection in active customer growth in the back half of 2023, with easing post-COVID churn, according to Raymond James.

The Chewy Analyst: Rick Patel upgraded the rating for Chewy from Market Perform to Outperform, while establishing a price target of $36.

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The Chewy Thesis: The company’s net sales per active customers (NSPAC) could continue to grow, since 60% of new customers were acquired over the past three years and “are still early in their journey with CHWY,” Patel said in the upgrade note.

Patel expects NSPAC growth to translate to revenue growth of 11% in 2023 and 12% in 2024.

“GM% has tailwinds supply chain initiatives, but we conservatively model GM% flat,” the analyst wrote. “Underlying Opex (excl. new investments) is leveraging as automation accelerates in fulfillment facilities (FCs),” he added.

CHWY Price Action: Shares of Chewy had risen by 3.12% to $32.07 at the time of publishing Wednesday.

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