- Wedbush analyst Seth Basham reiterated an Outperform rating on the shares of Chewy Inc CHWY with a price target of $45.
- The company noted customer acquisition and retention benefits from the Omicron period in late 2021-early 2022 that led some consumers to reduce in-store shopping, implying outsized churn impact in 4Q22 and 1Q23.
- While this leads the analyst to see more downside than upside risk to 1Q23 consensus’ sequential net adds forecast of -20,000, improvement is expected thereafter, including net adds growth in 2H23 and even for the full year 2023.
- The analyst noted that the ongoing discretionary demand headwinds and a slowdown in pet adoptions had reduced the pool of customers CHWY (and the rest of the industry) can actively target to join the platform.
- While customer growth likely will be subdued in 2023, CHWY sees plenty of room for NSPAC expansion with growth driven by cohort maturation, wallet share initiatives and pricing.
- The analyst regards lower demand contributed to much higher customer acquisition costs across the industry, with some channels seeing costs that are 30% - 40% higher than pre-pandemic baselines.
- The analyst is optimistic about the profitable growth potential for Chewy, afforded by international expansion, particularly to adjacent markets such as Canada.
- Following meetings for investors with CHWY management, the analyst came away incrementally positive on the long-term growth and margin prospects while more clearly seeing transitory challenges that should decrease in the coming months.
- Also Read: Chewy's Pet Services Dominance To Fuel Premiumization And Overseas Expansion, Analyst Predicts
- Price Action: CHWY shares are trading lower by 2.83% at $33.31 on the last check Monday.
© 2025 Benzinga.com. Benzinga does not provide investment advice. All rights reserved.
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