Chewy's Future Looks Bright: Analyst Upgrades Rating, Predicts 10% Revenue Growth Through 2027

Shares of Chewy Inc CHWY jumped in premarket trading on Monday, after remaining under pressure over the past month despite its first-quarter earnings beat.

The company could generate around 10% revenue growth and steady margin expansion from 2023 to 2027, according to Goldman Sachs.

The Chewy Analyst: Eric Sheridan upgraded the rating for Chewy from Neutral to Buy, while raising the price target from $42 to $50.

The Chewy Thesis: The company’s revenues are likely to be driven by a return to more stable customer growth following the pandemic-related headwinds, Sheridan said in the upgrade note.

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Chewy’s topline may also be driven by “rising revenue cohort trends reflecting pandemic cohorts maturing into year 2/3, which typically yields much higher NSPAC” as well as “upside optionality in the form of Chewy’s various strategic initiatives (e.g., international expansion, sponsored ads, insurance, etc.),” the analyst wrote.

Margin expansion may be maintained “as Chewy scales its private label and healthcare segments at high margins (likely driving gross margin above its long-term target of 25-28%) and as Chewy continues to execute on its supply chain transformation and automating its fulfillment centers,” he added.

CHWY Price Action: Shares of Chewy had risen by 0.05% to $38.00 at the time of publishing Monday.

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