Chewy’s Financial Outlook

Investing.com — Chewy’s (NYSE:CHWY) forward margin trajectory is “compelling and underestimated,” according to analysts at Morgan Stanley.

Analyst Insights

In a note to clients on Friday reiterating their “Overweight” rating of the stock, the analysts argued that the online pet food retailer is on a “realistic” path to posting more than $750 million in core income in its 2025 fiscal year, or a margin of over 6.1%. This would exceed Wall Street consensus estimates by 12%.

The analysts noted that Florida-based Chewy has demonstrated strong cost discipline and has delivered outsized beats on earnings before interest, taxes, depreciation, and amortization (EBITDA) this year. They indicated an increased probability of a raised $53 bull case (~100% upside) forecasting Chewy to reach $800 million EBITDA in FY25 and >$1B in FY26.

Company Performance

“Chewy is our favorite name in small- to medium-cap ecommerce businesses,” stated the Morgan Stanley analysts.

In August, Chewy announced it had 20 million active customers, with net sales per active customer reaching an all-time high. The firm reported higher-than-expected fiscal second-quarter results, expecting current quarter sales between $2.84 billion to $2.86 billion, surpassing FactSet estimates. Chewy also raised its full-year adjusted EBITDA margin outlook to a range of 4.5% to 4.7%. Following this news, shares surged.

Subscription Service

Much of Chewy’s growth has been fueled by its monthly subscription plan, providing pet products like food and litter to US customers via its website and mobile app. As of early US trading on Friday, Chewy’s market capitalization stood at $11.06 billion.

Chewy attracted considerable attention earlier this year when meme stock trader Keith Gill, known as “Roaring Kitty,” revealed a $245 million investment in the company.