Core Viewpoint - The article emphasizes a fundamentals-based approach to value investing, arguing against the misconception that low multiple stocks are inherently cheap, and highlights the importance of long-term growth and a strong balance sheet in investment decisions [1]. Group 1: Investment Philosophy - The company seeks to identify firms that provide long-term durability at affordable prices, focusing on steady growth and minimal cyclicality [1]. - There is an acknowledgment of the risks involved in investing in successful companies, particularly the potential to overpay, which underscores the significance of valuation [1]. - The article suggests that in certain scenarios, the potential for growth may outweigh immediate price considerations, indicating a broader perspective on investment timing [1].

Core Viewpoint - Chewy (CHWY) stock experienced a significant decline of over 20% after reaching a two-year high of $48.62 on June 6, primarily due to an 11% drop following earnings on June 11, but is currently testing a historically bullish trendline [1] Group 1: Stock Performance - CHWY is trading within one standard deviation of its 80-day moving average, having closed above this trendline in eight of the last ten sessions [2] - Historical data indicates that similar signals have led to a 78% chance of CHWY being higher one month later, with an average gain of 10.9% [3] - From its current price of $38.68, a similar gain would eliminate its 9.3% quarter-to-date deficit and extend its 15.4% year-to-date lead [3] Group 2: Technical Indicators - CHWY's 14-Day Relative Strength Index (RSI) is around 33, indicating it is in "oversold" territory, which has historically preceded rallies [3] - The stock is experiencing a potential short squeeze, with short interest up 7.7% and 15.51 million shares sold short, accounting for 7.3% of the total float [5] Group 3: Options Market Sentiment - The 10-day put/call volume ratio for CHWY is 0.68, indicating a higher level of pessimism among options traders compared to the past year [6] - Options are currently affordably priced, with a Schaeffer's Volatility Index (SVI) of 38% in the low 7th percentile of its annual range, suggesting a potential premium-selling strategy [7]

Group 1 - Chewy's stock closed at $40.00, down 2.49% from the previous day, underperforming the S&P 500 and Dow indices [1] - Over the past month, Chewy's shares have declined by 11.8%, contrasting with a 1.87% gain in the Retail-Wholesale sector and a 3.94% gain in the S&P 500 [1] Group 2 - Chewy is expected to report an EPS of $0.33, reflecting a 37.5% increase year-over-year, with anticipated revenue of $3.08 billion, a 7.83% rise from the same quarter last year [2] - For the full year, earnings are forecasted at $1.28 per share and revenue at $12.48 billion, indicating growth of 23.08% and 5.21% respectively compared to the previous year [3] Group 3 - The Zacks Rank system, which evaluates estimate changes, currently ranks Chewy at 3 (Hold), with a recent 12.9% upward shift in the EPS estimate [5] - Chewy's Forward P/E ratio stands at 32.1, higher than the industry average of 25, indicating a premium valuation [5] Group 4 - Chewy has a PEG ratio of 3.46, significantly above the Internet - Commerce industry's average PEG ratio of 1.44, suggesting a higher valuation relative to expected earnings growth [6] - The Internet - Commerce industry is ranked 62 in the Zacks Industry Rank, placing it in the top 26% of over 250 industries [6]

Core Insights - Chewy (CHWY) reported a 6.2% adjusted EBITDA margin in Q1 of fiscal 2025, an increase of 50 basis points year over year, with adjusted EBITDA rising 18.3% to $192.7 million from $162.9 million a year ago, indicating disciplined execution and progress toward long-term profitability targets [1][9] Financial Performance - The improvement in margins was driven by a focus on high-margin, recurring revenue streams, particularly the Autoship program, and the expansion of the sponsored ads business, which is the largest contributor to margin gains [2] - Operational discipline was evident as SG&A was maintained at 18.5% of net sales, reflecting tight cost control, while adjusted earnings per share increased 12.9% year over year to 35 cents, highlighting consistent bottom-line growth alongside margin expansion [3] Future Outlook - Management reaffirmed its 2025 adjusted EBITDA margin outlook of 5.4-5.7%, with the mid-point implying a 75-basis-point improvement from 2024, expecting approximately 60% of this expansion to come from gross margin gains [4] - Chewy aims to convert about 80% of adjusted EBITDA into free cash flow for 2025, with confidence in achieving a long-term adjusted EBITDA margin goal of 10% [5] Industry Comparison - Central Garden & Pet (CENT) reported a resilient margin performance in Q2 of fiscal 2025 despite a 7% revenue drop, with gross margin expanding by 180 basis points to 32.8% and adjusted earnings per share rising to $1.04 [6] - Petco Health and Wellness Company, Inc. (WOOF) focused on restoring profitability in Q1 of fiscal 2025, achieving a gross margin expansion of 30 basis points to 38.2% and an adjusted EBITDA margin improvement of 105 basis points to 6% [7] Stock Performance and Valuation - Chewy's shares have gained 23.3% year to date, outperforming the industry's growth of 7.4% [8] - The Zacks Consensus Estimate for Chewy's fiscal 2025 earnings implies year-over-year growth of 23.1%, with upward revisions in estimates for fiscal 2025 and 2026 [10] - Chewy trades at a forward price-to-sales ratio of 1.33X, below the industry's average of 2.02X, with a Value Score of B [13]

Core Insights - Chewy (CHWY) is a prominent player in the pet care industry, leveraging its strong e-commerce platform to cater to a growing number of pet owners. The stock is currently trading at a forward 12-month price-to-sales (P/S) multiple of 1.38X, which is below the industry average of 2.02X, raising questions about whether it is a buy, hold, or sell opportunity [1][21] Valuation Comparison - Chewy's valuation is attractive compared to peers such as Central Garden & Pet Company (CENT) at a forward 12-month P/S of 0.75, Petco Health and Wellness Company, Inc. (WOOF) at 0.15, and BARK, Inc. (BARK) at 0.33 [2] Stock Performance - Chewy's stock price has increased by 24.3% over the past three months, closing at $41.86, outperforming the industry's rise of 18.2% and the Retail - Wholesale sector's growth of 11.5% [3][5] - The stock is currently trading above its 50-day and 200-day moving averages of $41.53 and $35.26, indicating strong upward momentum and market confidence [9] Financial Performance - For the first quarter of fiscal 2025, Chewy reported net sales of $3.12 billion, an 8.3% year-over-year increase, exceeding guidance expectations [10] - The Autoship program generated record sales of $2.56 billion, accounting for 82% of total net sales and growing 14.8% year-over-year [11][13] - Chewy's active customer base grew to 20.8 million, a 3.8% year-over-year increase, with net sales per active customer rising by 3.7% to $583 [14] Growth Initiatives - Chewy's Vet Care business is expanding, with 11 clinics currently operating and plans to open 8-10 additional clinics in fiscal 2025 [15] - The Chewy+ membership program has successfully transitioned out of beta, showing increased customer engagement and order frequency [15] Future Outlook - For fiscal 2025, Chewy anticipates net sales between $12.3 billion and $12.5 billion, reflecting 6-7% year-over-year growth, with an adjusted EBITDA margin guidance of 5.4% to 5.7% [16] - The Zacks Consensus Estimate for EPS has seen upward revisions, with current estimates at $1.28 for the current year and $1.53 for the next year [17] Market Position - Chewy has demonstrated resilience through steady revenue growth and customer retention strategies, positioning itself as a high-growth, digitally native pet care leader [21]

Core Insights - Chewy (CHWY) experienced significant growth in active customers, reaching 20.8 million, a 3.8% year-over-year increase, with an addition of approximately 240,000 customers sequentially [1][11] - The company demonstrated improved customer retention and acquisition strategies, evidenced by a reduction in churn and higher reorder rates [2][3] Customer Growth and Retention - Chewy's active customer growth was supported by robust gross customer additions and a meaningful reduction in churn, indicating effective retention strategies [2] - The quality of new customer cohorts improved, leading to higher reorder rates and increased spending levels [3] Financial Performance - Net sales for the fiscal first quarter rose 8.3% year-over-year to $3.12 billion, driven by the expansion of Autoship subscriptions, healthcare services, and the Chewy+ membership program [3][4] - Net Sales Per Active Customer increased by 3.7% year-over-year to $583, indicating stronger customer engagement [4] Future Outlook - Chewy expects low-single-digit active customer growth for fiscal 2025, with current trends suggesting a potential for higher growth within that range [5] - The company maintained its full-year revenue guidance between $12.3 billion and $12.45 billion, implying a 6-7% year-over-year growth [5] Competitive Positioning - Chewy's net sales growth outperformed key competitors such as Central Garden & Pet Company (CENT) and Petco Health and Wellness Company, Inc. (WOOF) [6] - Central Garden & Pet reported a 7.4% year-over-year decline in net sales, while Petco experienced a 2.3% decline due to store closures [7][8] Stock Performance and Valuation - Chewy's shares have gained 27.3% year-to-date, significantly outperforming the industry growth of 7.7% [9] - The company trades at a forward price-to-sales ratio of 1.38X, below the industry average of 2.02X, indicating potential value [12] Earnings Estimates - The Zacks Consensus Estimate for Chewy's fiscal 2025 earnings implies a year-over-year growth of 10.3%, with a 7.3% increase expected for fiscal 2026 [13]

Market Overview - The Middle East conflict and macroeconomic uncertainty are expected to keep global stock markets volatile, suggesting that investors should focus on stocks with solid growth prospects rather than short-term fluctuations [1]. Chewy (CHWY) - Chewy reported solid revenue and earnings for Q1 FY25, but there are concerns regarding a decline in free cash flow [3]. - JPMorgan analyst Doug Anmuth raised the price target for CHWY from $36 to $47, maintaining a buy rating, and believes the post-earnings sell-off is overdone [4]. - Anmuth remains bullish on Chewy due to strong execution, growth in active customers, and profitability ramp, expecting multi-year profitability driven by sponsored ads and product mix [5]. - The company saw a sequential increase of 240,000 active customers in Q1 2025, marking the fourth consecutive quarter of growth [6]. Pinterest (PINS) - Pinterest has partnered with Instacart to make advertisements directly shoppable, which is expected to enhance ad performance [8]. - Bank of America analyst Justin Post reaffirmed a buy rating on PINS with a price target of $41, highlighting the potential for advertisers to utilize Instacart's purchase data [8][9]. - The partnership is anticipated to provide better ad campaign insights and could drive incremental ad spend from consumer packaged goods clients [11]. Uber Technologies (UBER) - Stifel analyst Mark Kelley initiated a buy rating on UBER with a price target of $110, viewing it as a "super app" for various services [13]. - Kelley believes that the emergence of autonomous vehicles presents minimal risk to Uber's business in the near-to-medium term due to several hurdles [14]. - He expects gross bookings growth of 16% in both 2025 and 2026, supported by expansion into non-urban areas and international markets [15]. - Kelley is optimistic about Uber's success in the Delivery segment, which is expected to facilitate customer acquisition [16].

Group 1 - The management team has effectively encouraged customers to opt for recurring purchases [1]

Core Viewpoint - Chewy's stock has experienced a significant decline of nearly 15% following a quarterly earnings report that, despite beating analyst estimates, was poorly received by investors [1][2]. Financial Performance - In the first quarter, Chewy achieved net sales growth of over 8% year-over-year, reaching $3.1 billion, while its non-GAAP net income improved to just under $149 million, or $0.35 per share [4]. - Analysts had anticipated slightly lower figures, with revenue expectations below $3.1 billion and adjusted profitability at $0.32 per share [4]. Market Valuation - Despite the positive earnings results, Chewy's stock is considered expensive, trading at a forward P/E ratio of almost 36, which raises concerns among investors given the company's single-digit percentage improvements and thin profit margins [5]. Analyst Reactions - Following the earnings report, several analysts adjusted their price targets for Chewy, with most raising their targets, although some provided less optimistic updates. Mizuho's David Bellinger reduced his target from $47 to $44 while maintaining a neutral recommendation [6]. Future Outlook - Chewy's Autoship program has shown promising results, indicating potential for increased recurring revenue. However, the stock's current valuation may limit its attractiveness unless the company can deliver more convincing quarterly earnings in the future [7].

Core Insights - Chewy Inc. reported better-than-expected earnings for Q1, with adjusted earnings of 35 cents per share, a 12.9% increase year-over-year, surpassing the consensus of 34 cents and management guidance of 30-35 cents [1] - The company achieved sales of $3.12 billion, reflecting an 8.3% year-over-year growth, exceeding the consensus of $3.08 billion and management guidance of $3.06 billion-$3.09 billion [1] Financial Outlook - For fiscal year 2025, Chewy anticipates sales between $12.30 billion and $12.45 billion, slightly below Wall Street's estimate of $12.54 billion [2] - The expected adjusted EBITDA margin for 2025 is projected to be between 5.4% and 5.7%, compared to 4.8% for fiscal year 2024 [2] - For Q2 2025, Chewy forecasts sales of $3.06 billion to $3.09 billion, above the consensus of $3.03 billion, and adjusted earnings of 30-35 cents per share versus a consensus of 31 cents [2] Stock Performance - Following the earnings announcement, Chewy shares increased by 2.5%, trading at $41.79 [3] Analyst Ratings and Price Targets - JP Morgan analyst Doug Anmuth maintained an Overweight rating and raised the price target from $36 to $47 [6] - Mizuho analyst David Bellinger maintained a Neutral rating and lowered the price target from $47 to $44 [6] - Wedbush analyst Scott Devitt maintained an Outperform rating and raised the price target from $39 to $45 [6] - Evercore ISI Group analyst Mark Mahaney maintained an Outperform rating and raised the price target from $47 to $52 [6] - Citigroup analyst Steven Zaccone maintained a Buy rating and raised the price target from $42 to $49 [6] - Guggenheim analyst Steven Forbes maintained a Buy rating and raised the price target from $42 to $45 [6]