On Thursday, Morgan Stanley reaffirmed its positive stance on Chewy Inc . (NYSE:CHWY) shares, adjusting the price target to $28 from the previous $27, while maintaining an Overweight rating on the stock.
The online pet retailer's recent financial results exceeded expectations, with a significant EBITDA outperformance and the announcement of its inaugural buyback program.
Chewy's latest earnings report revealed that the company not only surpassed revenue forecasts but also reported a substantial EBITDA margin that exceeded analysts' projections.
This financial achievement has been a contributing factor to Morgan Stanley's decision to raise the price target for the company's shares.
The company's announcement of its first-ever share repurchase program has been received as a positive sign of confidence in its financial health and future prospects.
This strategic move allows Chewy to buy back its own shares, potentially providing a return of capital to shareholders and signaling a bullish outlook from the company's management.
In addition to the financial results and the share buyback announcement, Chewy has observed promising signs in the market, including positive trends in pet ownership and improving customer metrics.
These factors are seen as indicators of sustained growth and are part of the rationale behind Morgan Stanley's continued Overweight rating.
Morgan Stanley's analyst noted that Chewy's performance and market indicators align with the firm's bullish thesis for the company.
The raised price target to $28 reflects the firm's confidence in Chewy's trajectory and its ability to capitalize on favorable market trends in the pet industry.
InvestingPro Insights
Chewy Inc. (NYSE:CHWY) has been demonstrating a robust financial stance, with recent data from InvestingPro underscoring the company's market position. The online pet retailer's market capitalization stands at a solid $9.37 billion, reflecting investor confidence in its business model. Despite a high price-to-earnings (P/E) ratio of 88.51, which suggests a premium valuation, the company's revenue growth over the last twelve months as of Q1 2025 has been positive at 7.46%. This growth aligns with the positive outlook expressed by Morgan Stanley.
InvestingPro Tips highlight that Chewy holds more cash than debt, which is a reassuring sign of financial health, and analysts predict net income growth this year. Moreover, the company has posted strong returns over the last week, month, and three months, with a notable one-week price total return of 32.23% and a one-month return of 43.43%. These impressive short-term returns could be indicative of the market's reaction to the company's recent financial success and strategic initiatives, such as the share repurchase program.
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