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Strength Seen in Chewy (CHWY): Can Its 5.4% Jump Turn into More Strength?

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Chewy (CHWY - Free Report) shares soared 5.4% in the last trading session to close at $84.71. The move was backed by solid volume with far more shares changing hands than in a normal session. This compares to the stock's 18.7% loss over the past four weeks.

Shares of Chewy got a boost following the company’s stronger-than-anticipated fourth-quarter fiscal 2020 results and an upbeat outlook. The company generated net sales of $2,043 million that comfortably surpassed the Zacks Consensus Estimate of $1,963 million, and surged approximately 51% from the year-ago period.

Markedly, the company added 1.4 million net active customers during the quarter under review, thereby ending the year with 19.2 million active customers. Also, launch of eGift cards and personalized products as well as introduction of innovative services such as telehealth offering and Connect with a Vet helped the company navigate through pandemic-induced challenges.

Management envisions first-quarter fiscal 2021 net sales in the band of $2.11-$2.13 billion, which reflects year-over-year growth of 36-37%, when adjusting for the $70 million of estimated pantry stocking benefit identified in last fiscal first quarter. For fiscal 2021, the company estimates net sales in the range of $8.85-$8.95 billion, suggesting year-over-year increase of 25-26% when adjusting for the pantry stocking benefit.

Price and Consensus

Price Consensus Chart for CHWY

This online pet store is expected to post quarterly loss of $0.04 per share in its upcoming report, which represents a year-over-year change of +66.7%. Revenues are expected to be $2.04 billion, up 26% from the year-ago quarter.

While earnings and revenue growth expectations are important in evaluating the potential strength in a stock, empirical research shows a strong correlation between trends in earnings estimate revisions and near-term stock price movements.

For Chewy, the consensus EPS estimate for the quarter has been revised 27.5% lower over the last 30 days to the current level. And a negative trend in earnings estimate revisions doesn't usually translate into price appreciation. So, make sure to keep an eye on CHWY going forward to see if this recent jump can turn into more strength down the road.

The stock currently carries a Zacks Rank 2 (Buy). You can see the complete list of today's Zacks Rank #1 (Strong Buy) stocks here >>>>


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