Chewy (CHWY - Free Report) shares have outpaced the broader market rally, driven by its ability to expand during the coronavirus lockdown environment.
Niche Pet Appeal?
Chewy started in 2011 and went public in June 2019. The Florida-based firm sells pet food, supplies, treats, medications, and more for a wide variety of animals. The e-commerce-focused pet store, which offers relatively speedy delivery, has expanded its customer base and sales despite the fact that Walmart (WMT - Free Report) , Target (TGT - Free Report) , Costco (COST - Free Report) , and other giants have bolstered their e-commerce offerings in the Amazon (AMZN - Free Report) -age.
The company in early April reported strong fourth quarter and fiscal 2019 results, with full-year sales up 40% to $4.85 billion. CHWY also added roughly 3 million customers to close the year with 13.5 million active customers.
CHWY's subscription-style Autoship customers accounted for over 70% of its total Q4 sales. This might help provide more sustainable and stabilized growth. “Higher spending from our existing customers and growing Autoship sales reflect strong business momentum as more customers continue to shift their spending to Chewy, driving increased basket size and higher repeat purchase activity,” CEO Sumit Singh said on its Q4 earnings call.
Chewy stock has outperformed Uber (UBER - Free Report) , Peloton (PTON - Free Report) , SmileDirectClub (SDC - Free Report) , and other 2019 IPO standouts over the last six months, up nearly 100% from under $25 a share to their current price of just under $50. More recently, CHWY shares have jumped 115% since March 12 to crush stay-at-home star Zoom’s (ZM - Free Report) 80%.
Our current Zacks estimates call for Chewy’s first quarter revenue to climb 40% to reach $1.55 billion. This would beat Q4’s 35% expansion and come on top of the year-ago period’s 45%. Overall, Chewy’s fiscal 2020 revenue is projected to jump 33% to $6.44 billion.
Meanwhile, CHWY’s adjusted loss is projected to grow from -$0.08 to -$0.11 per share. The firm continues to spend on expansion and coronavirus-based expenses are sure to play a role. Chewy’s adjusted fiscal year loss is expected to grow from -$0.29 a share to -$0.37. Investors should note that its FY21 figure is then projected to climb in the right direction to a -$0.12 a share loss.
Chewy is set to report its Q1 fiscal 2020 financial results after the market closes on Tuesday, June 9, for the three-month period ended in early May. Chewy is currently a Zacks Rank #2 (Buy) that sports an “A” grade for Growth and it is part of an industry that rests in the top 12% of our more than 250 Zacks industries.
CHWY stock does sit near its new highs, and playing a stock for near-term gains around earnings is risky, especially given Chewy’s recent run. That said, longer-term investors might want to take a chance on the e-commerce pet store for its ability to expand given its niche focus. Plus, the coronavirus might have accelerated the already rapid rise of e-commerce and delivery.
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