Chewy Inc's Shares Surge As Q1 Earnings Exceed Expectations: 4 Analysts Applaud Results

Shares of Chewy Inc CHWY spiked in early trading on Thursday, after the company reported upbeat revenues and earnings for its first quarter.

The report was released during the ongoing earnings season. Here are some key analyst takeaways from the earnings release.

Guggenheim Securities On Chewy

Analyst Steven Forbes maintained a Buy rating and price target of $45.

Chewy delivered an impressive first-quarter performance across the board, Forbes said in a note. “Most importantly, not only did net active customers grow slightly quarter-over-quarter but management reiterated its expectation for accelerated net active customer growth during 2H 2023,” he added.

“When combined with the fact that management's updated 2023 outlook only partially flows through the 1Q adjusted EBITDA beat—$27 million increased at the midpoint vs. ~$38 million beat relative to our expectations and also doesn't assume any improvement in hard goods sales nor any benefit from certain strategic initiatives (i.e., Sponsor Ads, CRM capabilities, and CarePlus), we see improved conviction behind our 2024 net sales & adjusted EBITDA builds,” the analyst further wrote.

Needham On Chewy

Analyst Anna Andreeva reiterated a Buy rating and price target of $55.

Chewy’s revenues and margins were better than expected, and it guided to second-quarter sales ahead of Street expectations, Andreeva said. It’s among “very few companies in consumer taking up the year's guidance for sales/EBITDA,” since the pet space remains resilient, and the “consumer isn't seen as trading down (CHWY isn't a price leader, we think a benefit in this environment),” she added.

“Net ads, a key area of investor focus, grew sequentially as gross ads continue to trend above pre-pandemic levels (and were up y/y) while churn from Hardgoods cohorts is normalizing,” the analyst further said.

Check out other analyst stock ratings.

Oppenheimer On Chewy

Analyst Rupesh Parikh reaffirmed an Outperform rating and price target of $50.

Chewy’s better-than-expected earnings were driven both by “top line delivery and stronger than expected margin expansion,” Parikh said. “Management also surprisingly tweaked higher FY23 sales and adjusted EBITDA guidance,” he added.

“The company plans to enter Canada in Q3 with an initial focus on the greater Toronto market,” the analyst further stated.

Wedbush On Chewy

Analyst Seth Basham maintained an Outperform rating and price target of $45.

Although Chewy raised its full-year sales and EBITDA margin outlook, the increase was less than the first-quarter beat and “implies slower-than-expected growth in the 2H,” the analyst wrote in a note.

Basham stated that the company’s expansion into Canada could potentially put pressure on margins. “Importantly, CHWY still expects positive customer growth in the 2H, but anticipates pricing benefits to moderate once it laps price increases and braces for incremental promotional activity as industry supply improves and freight headwinds dissipate,” he added.

CHWY Price Action: Shares of Chewy had climbed 21.3% to $35.77 at the time of publishing Thursday.

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