Chewy Stock Is Still a Favorite of Analysts as Its FCF is Strong

Core Insights - Chewy, Inc. (CHWY) stock has shown recovery from a recent low, with analysts projecting significantly higher price targets based on strong free cash flow (FCF) and consumer spending on pets [1][2][5] - Current stock price is $37.00, up from a low of $35.11, but below the peak of $42.33 [2][4] - Analysts suggest a potential value increase of 16% to nearly $43 based on FCF projections [2][4] Financial Performance - Chewy reported Q2 revenue growth of 8.6% and net income growth of 34.8% [5] - FCF margin improved from 3.20% to 3.41%, with expectations of at least a 3.75% margin in the coming year [5] - Projected sales for the next year are approximately $13.6 billion, leading to an estimated FCF of $510 million [5] Market Valuation - Using a 2.857% FCF margin and a 35x multiple, Chewy's market value could rise to $17.85 billion, representing a 16% increase from its current market value of $15.42 billion [5] - Current price target based on analysis is $42.83, with other analysts projecting targets as high as $48.20 [5][6] Investment Strategy - Suggested investment strategy includes buying in-the-money (ITM) calls with longer expiry periods and shorting out-of-the-money (OTM) puts to finance the investment [6][7] - Example strategy involves selling short Nov. 7 puts at a $34.00 strike price, yielding an immediate return of 1.735% [8]