Title: Should You Consider Buying Chewy Stock After Its Recent Guidance Upgrade?
Chewy's share price dipped last week despite the online pet retailer reporting a 5% revenue growth in Q3, boosting its full-year guidance. However, the stock has still soared over 33% this year. The surge in Chewy's popularity can be attributed to Reddit user Keith Gill, also known as Roaring Kitty, who revealed a significant investment in the company early this year.
Examining Chewy's Q3 results, revenue increased to $2.88 billion, with a significant jump in Autoship sales (9%). The net sales per active customer (NSPAC) rose by 4%, and the company added 200,000 new active customers. The gross margin improved by 80 basis points to 29.3%, and selling, general, and administrative (SG&A) expenses saw a 90-basis-point decrease. These improvements resulted in a 66% increase in Adjusted EBITDA and a 33% hike in Adjusted Earnings Per Share (EPS).
Moreover, Chewy boasted a free cash flow of $152 million in Q3, a substantial improvement from previous years. The company ended the quarter with $507 million in cash and marketable securities, demonstrating solid financial health.
Looking ahead, Chewy projects a 13% revenue growth in Q4 and raised its full-year guidance to an anticipated $2.84 billion to $2.86 billion, indicating a growth rate of 6%. Additionally, Chewy boosted its full-year Adjusted EBITDA margin guidance to a range of 4.6% to 4.8%, up from the earlier projected range of 4.5% to 4.7%.
Given Chewy's current forward price-to-earnings (P/E) ratio of around 25 and a price-to-earnings-to-growth (PEG) ratio of less than 1, the stock appears undervalued in comparison to competitors like Walmart and Tractor Supply. Furthermore, analysts predict over 50% upside potential due to factors such as expanding EBITDA margins, growing active customer bases, and strategic initiatives.
In conclusion, despite a recent dip, Chewy remains an attractive long-term investment opportunity due to its financial strength, increased revenue growth, and strong strategic growth initiatives.
Investors should take note of Chewy's financial growth, as its Q3 Adjusted Earnings Per Share (EPS) increased by 33%, indicating potential benefits for those investing in the company's stock. Furthermore, with a current forward price-to-earnings (P/E) ratio of around 25 and a price-to-earnings-to-growth (PEG) ratio of less than 1, Chewy could be an undervalued finance opportunity compared to competitors.
