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1. Company Snapshot

1.a. Company Description

Chewy, Inc., together with its subsidiaries, engages in the pure play e-commerce business in the United States.The company provides pet food and treats, pet supplies and pet medications, and other pet-health products, as well as pet services for dogs, cats, fish, birds, small pets, horses, and reptiles through its www.chewy.com retail Website, as well as its mobile applications.It offers approximately 100,000 products from 3,000 partner brands.


The company was founded in 2010 and is headquartered in Dania Beach, Florida.

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1.b. Last Insights on CHWY

Breaking News: Chewy Inc received an upgrade from Raymond James to outperform from market perform, citing a buying opportunity. The pet retailer was trading at $25.20, up 4.3%. The upgrade was one of several analyst research calls on Thursday, alongside other companies such as Analog Devices and eBay. No recent earnings release was available, but growth stocks, including Chewy, are being considered for long-term investment. Raymond James recommends buying Chewy stock.

1.c. Company Highlights

2. Chewy's Q3 Earnings: A Strong Beat on Multiple Fronts

Chewy's Q3 net sales grew 8.3% year-over-year to $3.12 billion, surpassing the high end of guidance, driven by unit volume growth. The company's gross margin expanded 50 basis points to 29.8%, fueled by sponsored ad growth, a strong Autoship baseline, and favorable category mix. Adjusted EBITDA reached $181 million, up 30% year-over-year, with adjusted EBITDA margin expanding 100 basis points to 5.8%. Earnings per share (EPS) came in at $0.32, significantly beating estimates of $0.1248. The strong financial performance was accompanied by a 5% year-over-year growth in active customers to 21.2 million, with improvements across the active customer funnel. The company generated $176 million of free cash flow and repurchased $55 million of shares.

Publication Date: Dec -20

📋 Highlights
  • Net Sales Growth:: Q3 net sales rose 8.3% to $3.12B, exceeding guidance, driven by unit volume growth.
  • Adjusted EBITDA Expansion:: Adjusted EBITDA surged 30% to $181M, with margin expanding 100 bps to 5.8%.
  • Active Customer Growth:: Active customers reached 21.2M (+5% YoY), with 18% YoY growth in net adds and lower churn.
  • Gross Margin Improvement:: Gross margin expanded 50 bps to 29.8%, fueled by sponsored ads, Autoship, and category mix.
  • Chewy+ Program Success:: 80% of members are paid, driving higher order frequency and category engagement, with 40% of CVC customers net new.

Operational Highlights

The company's operational performance was marked by strong execution across various fronts. The Chewy+ paid membership program is outperforming expectations, driving higher order frequency and category engagement. The company opened two additional Chewy Vet Care practices, bringing the total to 14 locations across five states. Chewy's health offerings, including Chewy Vet Care and the recently acquired Smart Equine, are expected to enhance the company's premium health and nutraceutical assortment.

Guidance and Outlook

For full-year 2025, Chewy expects net sales growth of approximately 8%, with adjusted EBITDA margin expansion to 5.6-5.7%. The company is on track to achieve its long-term objective of 10% adjusted EBITDA margin. Looking ahead to 2026, the company expects durability in net adds to continue increasing, with an implied growth rate of high single digits in Q4, reflecting a tougher comparison to a strong Q4 last year. Analysts estimate next year's revenue growth at 6.7%.

Valuation

Chewy's current valuation metrics indicate a premium valuation. The stock trades at a P/E Ratio of 65.14, P/S Ratio of 1.07, and EV/EBITDA of 39.37. The company's Return on Equity (ROE) stands at 55.17%, and Return on Invested Capital (ROIC) is 18.45%. The Free Cash Flow Yield is 3.44%, indicating a reasonable valuation based on cash flow generation. These metrics suggest that the market has priced in a significant growth premium, and the company's ability to deliver on its growth expectations will be crucial in justifying the current valuation.

Program Synergies

The interaction between Chewy+ and Autoship customers is complex, with Chewy+ affording targeted and segmented marketing. The company aims to increase NSPAC and basket consolidation with these programs. The Chewy+ program has seen strong conversion and retention, with 80% of members now paid, and is no longer dilutive. The company is running ahead of plan in 4Q, with strong execution during Black Friday and Cyber Monday.

3. NewsRoom

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Don't Be Fooled by Chewy's Most-Cited Statistic

Feb -22

Source: fool.com

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Got $1,000? 3 Stocks to Buy Now While They're on Sale.

Feb -21

Source: fool.com

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CMRC vs. CHWY: Which Stock Should Value Investors Buy Now?

Feb -20

Source: zacks.com

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Raymond James Says Buy the Dip on Chewy Stock

Feb -19

Source: schaeffersresearch.com

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3 Brilliant Growth Stocks to Buy Now and Hold for the Long Term

Feb -19

Source: fool.com

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Here Are Thursday’s Top Wall Street Analyst Research Calls: Analog Devices, Chewy, Credo Technology, eBay, Fiverr, Shopify, Verizon, and More

Feb -19

Source: 247wallst.com

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Why Chewy (CHWY) Outpaced the Stock Market Today

Feb -18

Source: zacks.com

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1 Growth Stock Down 80% to Buy Right Now

Feb -18

Source: fool.com

4. Business Breakdown

4.a. Revenues by Country

4.b. Revenues by Segment

5. Expected revenues mid-term growth (7.27%)

6. Segments

Consumables

Expected Growth: 8%

Chewy's consumables segment growth is driven by increasing pet humanization, rising e-commerce adoption, and expanding product offerings. Strong brand recognition, competitive pricing, and convenient auto-ship options also contribute to growth. Additionally, Chewy's strategic partnerships with pet food manufacturers and its private label brands further boost sales.

Other

Expected Growth: 5%

Chewy's 'Other' segment, with 5% growth, is driven by increasing pet owner adoption of pet health services, expansion of Chewy Health platform, and growth in sales of pet medications and supplies. Additionally, the rise of e-commerce and pet humanization trends contribute to the segment's growth.

Hardgoods

Expected Growth: 6%

Chewy's Hardgoods segment growth is driven by increasing pet humanization, rising e-commerce adoption, and expanding product offerings. Strong brand recognition, competitive pricing, and convenient shipping options also contribute to growth. Additionally, the company's strategic partnerships with pet food manufacturers and its Autoship feature, which encourages repeat purchases, further boost sales.

7. Detailed Products

Pet Food

Wide selection of high-quality pet food from popular brands, including Hill's Science Diet, Royal Canin, and Purina Pro Plan

Pet Supplies

Variety of pet supplies, including toys, treats, and grooming tools from brands like Kong, Pet Zone, and Oster

Pet Medication

Prescription and non-prescription medications for pets, including flea and tick prevention, heartworm prevention, and pain relief

Pet Grooming

Grooming tools and supplies, including shampoos, conditioners, and brushes from brands like Earthbath and Oster

Pet Health Supplements

Supplements and vitamins for pets, including joint support, digestive health, and skin and coat health

Pet Accessories

Pet accessories, including collars, leashes, and pet beds from brands like Yellow Dog Design and Pet Zone

8. Chewy, Inc.'s Porter Forces

Forces Ranking

Threat Of Substitutes

Chewy's products are highly specialized and pet owners are loyal to specific brands, making substitutes less of a threat.

Bargaining Power Of Customers

While customers have some bargaining power due to the online nature of the business, Chewy's competitive pricing and loyalty programs help mitigate this threat.

Bargaining Power Of Suppliers

Chewy has a diverse supplier base and is not heavily reliant on any one supplier, reducing the bargaining power of suppliers.

Threat Of New Entrants

While there are some barriers to entry, the online pet supply market is relatively easy to enter, and new entrants could potentially disrupt the market.

Intensity Of Rivalry

The online pet supply market is highly competitive, with many established players competing for market share, leading to a high intensity of rivalry.

9. SWOT Analysis

Strength

Weaknesses

Opportunities

Threats

10. Capital Structure

10.a. Balance Sheet

10.b. Weighted Average Cost of capital

Value
Debt Weight 52.18%
Debt Cost 3.95%
Equity Weight 47.82%
Equity Cost 8.48%
WACC 6.12%
Leverage 109.12%

11. Quality Control: Chewy, Inc. passed 4 out of 9 key points

12.a Historical Valuation

12.b Price/Earnings Ratio

12.c Margin Valuation

12.d Peers Valuation

Peers Group Analysis

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Etsy

A-Score: 5.3/10

Value: 7.0

Growth: 7.8

Quality: 7.1

Yield: 0.0

Momentum: 6.0

Volatility: 3.7

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Advance Auto Parts

A-Score: 5.0/10

Value: 9.4

Growth: 1.4

Quality: 4.1

Yield: 5.0

Momentum: 8.0

Volatility: 2.3

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Chewy

A-Score: 4.5/10

Value: 1.7

Growth: 9.0

Quality: 5.5

Yield: 0.0

Momentum: 6.5

Volatility: 4.3

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Wayfair

A-Score: 4.3/10

Value: 5.7

Growth: 4.6

Quality: 4.0

Yield: 0.0

Momentum: 9.5

Volatility: 2.3

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GameStop

A-Score: 3.7/10

Value: 3.4

Growth: 4.3

Quality: 5.8

Yield: 0.0

Momentum: 5.5

Volatility: 3.0

1-Year Total Return ->

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RH

A-Score: 2.2/10

Value: 3.8

Growth: 2.9

Quality: 3.4

Yield: 0.0

Momentum: 1.0

Volatility: 2.0

1-Year Total Return ->

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Peers Metrics

12.e Scoring Insights

12.f DCF BETA

Parameters

Short Term Growth

Short term Time

Long-Term Growth

WACC

Target Price

24.56$

Current Price

24.56$

Potential

-0.00%

Expected Cash-Flows