What's Driving Chewy's Stock Up 47%?

Core Insights - Chewy's stock has surged 47% over the past year, currently trading around $32, but has declined 73% from its February 2021 peak of approximately $120, and is below its June 2019 IPO price of $35 [1] - The company has seen a recent uptick in pet adoption rates and a steady increase in its customer base, contributing to positive sales growth [1][2] Financial Performance - Chewy projects Q4 sales to increase by approximately 13%, reaching between $3.12 billion and $3.18 billion, while revising its full-year sales guidance to a range of $11.84 billion to $11.88 billion, representing 6% growth [2] - The adjusted EBITDA margin guidance has been raised to 4.6% to 4.8%, exceeding the previous outlook of 4.5% to 4.7% [2] - In Q3, Chewy's revenue grew 5% year-over-year to $2.9 billion, driven by a 9% increase in Autoship sales, which reached $2.4 billion [3] - Net sales per active customer rose 4% year-over-year to $567, despite a decline of 100,000 active customers year-over-year, with an addition of 200,000 new active customers during the quarter [3] - Gross margin expanded by 80 basis points year-over-year to 29.3%, and adjusted earnings per share increased by 33% year-over-year to $0.20 [3] - Free cash flow grew three times year-over-year to $152 million, with the company ending the quarter with $507 million in cash and marketable securities and no debt [3] Market Comparison - Chewy's stock has underperformed the broader market over the last three years, with returns of -34% in 2021, -37% in 2022, and -36% in 2023 [4] - In contrast, the Trefis High Quality Portfolio has outperformed the S&P 500 each year during the same period, indicating less volatility and better returns [4] Business Model and Offerings - Chewy sells a variety of pet food and supplies, and is expanding into new categories such as personalized products, pet insurance, and telehealth services for pets [5]