Chewy Earnings – Here’s What to Expect

Online pet retailer Chewy (NYSE: CHWY) is set to release its earnings for the fourth quarter after the market close on Wednesday, March 22, and with its share price up just over 1% in 2023, investors will be hoping the results and guidance provide a catalyst to move higher.

Despite starting the year on a positive note, Chewy's share price has struggled in the last month or so, and it is now trading around the $38.61 mark after hitting a high of over $52 per share at the start of February.

According to Common Thread Collective, the pet care market grew to $261 billion in 2022, from $245 billion in 2021, with its estimated growth rate expected to push the market to $350 billion by 2027.

In its third-quarter release, Chewy said active customers grew 0.6% year-over-year, with customer retention remaining stable. Revenue in Q3 came in at $2.53 billion in the quarter, up 14.5% compared to the previous year. 

It revealed that for the fourth quarter, it expects revenue to be between $2.63 billion and $2.65 billion, representing 10% to 11% year-over-year growth.

“As consumers navigate a challenging economic backdrop, spending in the pet category remains resilient,” the company said in its third-quarter results. “Our current outlook for the balance of 2022 assumes these trends continue and that we don't see any material change in current economic circumstances, consumer behavior, or key inputs like fuel prices.”

Earlier this month, Chewy was initiated with a Buy rating by Roth MKM analyst David Bellinger. The analyst, who assigned a $52 price target on Chewy, told investors in a note that the “building strength of Chewy's core business stands out.”

He added that the “most overlooked” part of a Chewy investment thesis is the very narrow and highly predictable revenue course, which enables better profitability within its core $7 billion to $8 billion auto-ship business. 

Last month, Gordon Haskett analyst Greg Sommer started Chewy at Hold with a $46 per share price target. 

Sommer said in a research note that investors are currently concentrated on the macro environment and a pandemic “hangover” weighing on new customer additions. Even so, Gordon Haskett acknowledges the company is investing wisely in initiatives and infrastructure that will enhance the business long-term.

Ahead of Wednesday's release, out of nine analysts, five have a Buy rating on the stock, with four at Hold, according to TipRanks. The average price target of $45.33 represents a potential 19% upside from current levels.