Chewy Inc. (CHWY Quick QuoteCHWY - Free Report) is set to announce its third-quarter fiscal 2024 earnings on Dec. 4 before the opening bell. The pet-centric e-commerce company has attracted attention, thanks to its robust growth trajectory and strategic initiatives. However, with earnings just around the corner, it is crucial to determine whether Chewy remains a wise investment at this stage.

Chewy’s impressive growth, solid market position and loyal customer base have fortified its position. The Zacks Consensus Estimate places revenues at $2.86 billion for the upcoming quarter, suggesting a 4.5% increase from the year-ago period.

On the earnings front, the consensus estimate has held steady at 23 cents a share over the past 30 days, implying a substantial 53.3% year-over-year increase. Chewy has a strong track record, with an average earnings surprise of 50.9% over the past four quarters. In the last reported quarter, the company exceeded the Zacks Consensus Estimate by an impressive margin of 9.1%.

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What the Zacks Model Says About CHWY

Our proven model predicts that Chewy is likely to beat earnings this time. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the odds of an earnings beat, which is the case here. You can see the complete list of today’s Zacks #1 Rank stocks here.

Chewy has an Earnings ESP of +2.67% and carries a Zacks Rank #2. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

CHWY: Factors at Play

Chewy is steadily adapting to shifting market dynamics, positioning itself as a strong contender in the growing pet care sector. The company’s expanding customer base, recurring revenue model and diversified service offerings, including veterinary clinics and pharmacy services, have strengthened its position. 

By consistently broadening its inventory, Chewy has been meeting customer preferences and needs effectively. This approach, coupled with strategic promotions and targeted marketing initiatives, is anticipated to attract new customers while encouraging increased spending from existing ones.

The Autoship program’s continued success is also expected to have played a crucial role in driving revenues. As the program grows, its convenience and value are likely to lead to higher customer retention. This feature not only simplifies the purchasing process but also helps the company maintain a steady revenue stream, enabling it to tailor offerings based on demand. 

Chewy's strategic expansion into veterinary care has shown promising results. The company opened two additional Chewy Vet Care clinics, bringing the total to six locations at the end of the second quarter. These clinics not only enhance customer loyalty but also act as strategic entry points for new customers, embedding them into the Chewy ecosystem. 

The Sponsored Ads program is another contributor to Chewy's top line. With increasing advertiser demand and improved click-through rates, this initiative is scaling effectively. Chewy's enhancements to its mobile app are driving increased customer acquisition and order frequency. Higher engagement levels among app users translate into larger baskets.

CHWY Stock's Six-Month Snapshot

Chewy has witnessed an impressive surge in its stock price over the past six months. The stock has rallied 50.1%, outpacing the industry’s growth of 19.4%.

During the said time frame, CHWY has outperformed its close competitors, Petco Health and Wellness Company, Inc. (WOOF Quick QuoteWOOF - Free Report) and Central Garden & Pet Company (CENT Quick QuoteCENT - Free Report) , but trailed BARK, Inc. (BARK Quick QuoteBARK - Free Report) . 

While BARK and WOOF shares have climbed 54.3% and 3.7%, respectively, during the period, CENT has declined 6.9%.

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Is CHWY a Strong Case for Value Seekers?

From a valuation perspective, Chewy shares present an attractive opportunity, trading at a discount relative to historical and industry benchmarks. With a forward 12-month price-to-sales ratio of 1.14, below the five-year median of 1.63 and the industry’s average of 1.80, the stock offers compelling value for investors seeking exposure to the sector.

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Investment Thesis on CHWY

Chewy’s substantial stock price appreciation, underscored by robust financial metrics and strategic initiatives, highlights its growth potential. The company's focus on innovation, particularly through the expansion of its Autoship program and pharmacy services, is likely to remain a key driver of revenue growth. With promising prospects and an attractive valuation, Chewy's appears well-positioned for sustained momentum.

Final Words on CHWY

Investing in Chewy stock ahead of Q3 earnings appears prudent. The company's diversified services, including veterinary clinics, pharmacy offerings and Autoship program, drive customer engagement. Its focus on expanding product offerings and enhancing customer experience aligns with evolving consumer preferences, while strategic marketing initiatives and the scaling of its Sponsored Ads program further bolster revenue potential.