🐂 Not all bull runs are created equal. November’s AI picks include 5 stocks up +20% eachUnlock Stocks

TD Cowen assumes Chewy stock coverage at Buy, shares up

Published 10/09/2024, 09:04 PM
© Reuters
CHWY
-

Investing.com -- TD Cowen on Wednesday started coverage of Chewy (NYSE:CHWY), an online retailer specializing in pet products, with a Buy rating and a price target of $38.

Chewy's shares rose 2% in premarket trading. 

The bank’s analysts expect Chewy to achieve approximately 9% annual revenue growth from fiscal year 2024 to fiscal year 2029. This growth projection is coupled with an anticipated expansion in EBITDA margins from 4.6% to 8.0% and strong free cash flow conversion during the same period.

The firm's top five proprietary analyses revealed several key points supporting Chewy's growth narrative.

1) Chewy currently holds a 7.9% share of the U.S. pet industry market, with forecasts indicating an increase to 8.7% by 2028.

2) If Chewy maintains its share of U.S. pet e-commerce, its growth is expected to surpass management and consensus estimates.

3) TD Cowen’s proprietary survey data indicated year-over-year and quarter-over-quarter increases in purchasers during the third quarter of 2024 to date.

4) The survey also suggested that Autoship customers, who represent 50% of monthly purchasers, spend 3.5 times more on the platform compared to non-Autoship customers.

5) Lastly, analysts said 67% of pet owners still conduct the majority of their pet product purchases in physical stores.

TD Cowen projects the U.S. pet industry to grow from $144 billion in 2023 to $192 billion by 2028, a compound annual growth rate (CAGR) of approximately 6%. E-commerce penetration in the pet market is also expected to increase from 36% in 2023 to around 45% by 2028.

“Thus, the pet eCommerce industry should grow at a ~10% CAGR from '23-'28. We expect Chewy to maintain its share of pet eCommerce, while taking share in the industry overall,” analysts wrote.

For fiscal year 2024, TD Cowen forecasts Chewy's total revenue to reach $11.8 billion, a 5.9% year-over-year increase and at the upper end of the company's guidance range of $11.6 billion to $11.8 billion. This growth is driven by Autoship revenue of $9.2 billion, marking a 9.0% year-over-year increase.

The number of active customers is expected to grow in the second half of 2024, reaching 20.7 million in the fourth quarter as product improvements and favorable market dynamics contribute to a recovery.

EBITDA for fiscal year 2024 is projected at $549 million, with margins expanding to 4.6% due to leverage in cost of goods sold (COGS) and selling, general, and administrative expenses (SG&A).

Long-term, total revenue is forecasted to rise at an 8.6% CAGR from 2024 to 2029, driven by growth in active customers, continued strength in Autoship, rapid growth in Chewy Health, and the emerging advertising business.

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.