After Doubling, Is There Still Time to Buy Chewy Stock as Sales Soar?

Core Viewpoint - Chewy has demonstrated strong performance with a stock price increase of over 120% in the past year, driven by revenue growth and improved gross margins [1][4]. Revenue Growth - Chewy's revenue for fiscal Q4 2024 reached $3.25 billion, a nearly 15% year-over-year increase, surpassing the company's forecast [4]. - The company experienced a significant improvement in sales growth, with Q4 growth being notably higher than the 3% and 5% growth in previous quarters [4]. - Autoship sales increased by over 21% year-over-year to $2.6 billion, accounting for 80.6% of total revenue [5]. - Net sales per active customer rose by 4% to $578, and Chewy added 400,000 active customers in fiscal 2024 [5]. Gross Margin and Profitability - Gross margin increased by 30 basis points to 28.5%, attributed to a shift towards higher-gross-margin businesses [6]. - Adjusted earnings per share (EPS) jumped 56% to $0.28, while adjusted EBITDA climbed 44% year-over-year to $124.5 million [7]. - Free cash flow was reported at $452.5 million, with the company buying back $942.8 million in stock during the year [7]. Future Guidance - For fiscal Q1, Chewy forecasts revenue growth of 6% to 7%, estimating revenue between $3.06 billion and $3.09 billion [8]. - The company anticipates full-year revenue growth of 6% to 7%, projecting total revenue between $12.3 billion and $12.45 billion [9]. - Chewy's revenue growth for fiscal 2024 was 6.4%, which included a 53rd week; without this, growth would have been around 4.4% [9]. Market Position and Valuation - Chewy is positioned as a defensive stock, benefiting from stable pet ownership and a recession-resistant business model [10][12]. - The stock trades at a forward price-to-earnings (P/E) ratio of approximately 27, which is competitive among recession-resistant retailers [13]. - Chewy has a price/earnings-to-growth (PEG) ratio of 0.7, indicating it may be undervalued compared to its expected earnings growth [13]. Investment Appeal - Despite significant price appreciation, Chewy remains an attractive investment due to its strong growth potential and defensive qualities in an uncertain market [15].