Get 40% Off
🤯 This Tech Portfolio is up 29% YTD! Join Now to Get April’s Top PicksGet The Picks – Just 99 USD

Morgan Stanley Says Farfetch, Chewy May Have Bottomed

Published 06/11/2022, 01:32 AM
Updated 06/11/2022, 01:32 AM
© Reuters.

© Reuters.

By Sam Boughedda

In a note discussing e-commerce firms, Morgan Stanley analyst Lauren Schenk said that Farfetch (NYSE:FTCH) and Chewy (NYSE:CHWY) may have bottomed.

Schenk said that while select e-commerce names appear de-risked from a valuation and estimate perspective, they still think it's still too early to step in on most. However, they identified which "eComm stocks may have bottomed/look more attractive (FTCH, CHWY)."

"Over the last few months we've seen increasing signs of both 2H macro and micro slowdowns," said the analyst. "As a result, we lowered our macro eCommerce forecast to ~8%/10% for 22/'23 e-commerce growth. However, consumer spending weakness has been concentrated in discretionary low-to-middle income purchases thus far – apparel, home goods, home furnishings, electronics, etc. where retailers over ordered inventory and demand is slowing."

"Many of the companies in our coverage were COVID beneficiaries and share a similar set of attributes that are being penalized by the market: decelerating growth, tough comps, and share give back/reversion. These factors, combined with rising inflation and higher interest rates, make forecasting ‘22/’23 a difficult exercise," added Schenk.

Morgan Stanley models SMID eCommerce players' 4-year CAGRs to decelerate by ~600 bps, on average, in 2H22 vs. 1H22, even though on a one-year basis, it implies second-half acceleration for some names, including Chewy, Wayfair (NYSE:W), and Peloton (NASDAQ:PTON).

"In eCommerce, we like FTCH for its lower inventory risk, reset numbers, accelerating '23 GMS growth, and higher income exposure which tends to be more resilient in a downturn, and CHWY for investors with longer-term horizons given recent performance vs. fundamentals, consumables exposure, strong cohort economics, and secular growth."

Latest comments

Risk Disclosure: Trading in financial instruments and/or cryptocurrencies involves high risks including the risk of losing some, or all, of your investment amount, and may not be suitable for all investors. Prices of cryptocurrencies are extremely volatile and may be affected by external factors such as financial, regulatory or political events. Trading on margin increases the financial risks.
Before deciding to trade in financial instrument or cryptocurrencies you should be fully informed of the risks and costs associated with trading the financial markets, carefully consider your investment objectives, level of experience, and risk appetite, and seek professional advice where needed.
Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. The data and prices on the website are not necessarily provided by any market or exchange, but may be provided by market makers, and so prices may not be accurate and may differ from the actual price at any given market, meaning prices are indicative and not appropriate for trading purposes. Fusion Media and any provider of the data contained in this website will not accept liability for any loss or damage as a result of your trading, or your reliance on the information contained within this website.
It is prohibited to use, store, reproduce, display, modify, transmit or distribute the data contained in this website without the explicit prior written permission of Fusion Media and/or the data provider. All intellectual property rights are reserved by the providers and/or the exchange providing the data contained in this website.
Fusion Media may be compensated by the advertisers that appear on the website, based on your interaction with the advertisements or advertisers.
© 2007-2024 - Fusion Media Limited. All Rights Reserved.