Chewy Stock Keeps Beating the Stock Market. Time to Buy?

Core Viewpoint - Chewy has demonstrated strong earnings growth and stock performance, outperforming the S&P 500, making it a potential investment opportunity [2][14]. Company Overview - Chewy is an online retailer specializing in pet supplies and veterinary care, offering a wide range of products including treats, toys, food, and prescription drugs [4]. - The company has expanded its revenue streams by opening veterinary clinics, which also helps introduce its e-commerce platform to new customers [4]. Financial Performance - In the first quarter of fiscal 2025, Chewy reported an 8% increase in sales to $3.1 billion, exceeding its guidance [6]. - The company achieved over $192 million in adjusted EBITDA, which is $29.8 million higher than the previous year [6]. - Chewy maintains a strong financial position with $616 million in cash and no debt [5]. Customer Engagement - Chewy's AutoShip service, which allows customers to set up automatic reorders, accounts for 82% of its net sales, indicating strong customer loyalty [8]. - The introduction of sponsored ads in 2023 has contributed significantly to gross margin gains, enhancing revenue growth [9]. Growth Strategy - Chewy aims to increase its adjusted EBITDA margin from 6.2% to a long-term goal of 10% through initiatives like AutoShip and sponsored ads [9]. - The company is actively repurchasing shares, using approximately $23 million of its free cash flow for this purpose [7]. Stock Valuation - Chewy's stock is currently trading at 32 times forward earnings estimates, which is higher than earlier in the year [10]. - Despite the increased valuation, the long-term prospects for Chewy remain positive, suggesting that the stock may still be a reasonable investment [12].