- Needham analyst Anna Andreeva reiterated a Buy rating on the shares of Chewy Inc (NYSE:CHWY) with a price target of $55.
- The company is slated to report 1Q earnings on May 31.
- The analyst expects sales growth of +12%, but after Petco Health and Wellness Company (NASDAQ:WOOF) earnings, the analyst has lowered the assumptions for net ads and for Hardgoods.
- CHWY has been relatively quiet on the promotional front, except for incremental customer acquisition promotions, which the analyst expects to drive gross ads, although higher churn from Hardgoods is still a headwind in 1H23.
- According to the analyst, the biggest takeaways from WOOF’s earnings include deceleration in March/April continuing into May, Hardgoods remaining sluggish, and a disappointing net ads scenario.
- The pet space is defensive, and demand is inelastic, plus the headwinds from last year across the supply chain and wage/labor pressures are dissipating, with sell-side estimates poised for an upside in the analyst’s view.
- While net ads are likely under pressure still in 1H23, the analyst believes the bulk of the contraction is coming from the more discretionary Hardgoods and ads in Consumables/Healthcare remain strong.
- Also, the analyst concluded that spending per pet still has room to go higher, given the higher spending nature of the newer millennial cohorts.
- Price Action: CHWY shares are trading higher by 2.59% at $30.93 on the last check Friday.
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