Company Overview - Chewy is a leading e-commerce specialist in pet goods, having debuted on public markets in 2019 and reaching a peak share price of $100 by 2021 before experiencing a decline to around $15 [5] - The company has shown significant operational strength, with sales increasing fivefold and gross profit margins improving by approximately 10 percentage points since its IPO [6] Financial Performance - Chewy's active customer base has doubled from 10.6 million in 2019 to 21.2 million currently, indicating strong customer retention and growth [6] - Despite a 32% decline from its 52-week high, Chewy has delivered acceptable earnings, making it a potentially attractive investment opportunity [6] Market Data - Current market capitalization stands at $13 billion, with a current share price of $31.69 [7][8] - The stock has a gross margin of 28.58% and a forward earnings valuation of 26 times [8][10] Strategic Initiatives - Chewy is focusing on higher-margin opportunities, including streamlining its Autoship service, expanding Chewy Vet Care, and enhancing its private-label brand, Get Real [10] - The company is also developing a rewards program, Chewy+, and aims to create a comprehensive one-stop shop for pet owners, offering food, medicine, toys, insurance, and veterinary services [12]

Company Overview - Chewy operates in the pet supply e-commerce market, which is currently valued at approximately $152 billion annually in the U.S. and is projected to grow at a compound annual growth rate (CAGR) of 6% through 2028, reaching $192 billion [3] - The company has a market capitalization of $13 billion and reported net sales of $3.12 billion in Q3 2025, reflecting an 8.3% year-over-year increase [5][6] Competitive Landscape - Chewy faces intense competition from major retailers like Amazon and Walmart, which dominate the online pet supply market, with Amazon capturing nearly 50% of e-commerce sales, Chewy at 41%, and Walmart at 33% [4] - The business environment is characterized by thin margins, with Chewy's gross margin at 28.58% and net margin at 1.9%, which, while improved from the previous year, remain lower compared to Amazon's gross margin of around 50% [5][6] Customer Loyalty and Business Model - Chewy has established a strong customer loyalty base, with high ratings for convenience and service, exemplified by personalized customer interactions [2] - The Autoship program is a significant contributor to Chewy's revenue, accounting for 84% of net sales in Q3 2025, providing predictability in cash flow and enhancing customer retention [7] Future Prospects - Chewy is expanding its offerings into pet insurance, veterinary telehealth, and pet prescriptions, which are expected to strengthen its margins further [6] - The company needs to expand its market presence beyond the U.S. and continue innovating to maintain competitiveness against larger rivals [8]

Core Viewpoint - The article highlights five top stocks to consider for investment in early 2026, emphasizing their strong earnings potential and growth opportunities in various sectors. Group 1: Amazon - Amazon is positioned as a strong investment due to its leadership in e-commerce and cloud computing, with a market cap of $2.6 trillion and a gross margin of 50.05% [5][3] - The company is leveraging artificial intelligence to enhance its e-commerce efficiency and AWS has an annual revenue run rate exceeding $132 billion [5][3] - The stock is considered a safe bet with a current price of $240.95, reflecting a 3.38% increase [4][3] Group 2: Eli Lilly - Eli Lilly is a leader in the weight loss drug market, particularly with its products tirzepatide (Zepbound and Mounjaro), contributing to significant sales growth [6][8] - The company has a market cap of $1 trillion and a gross margin of 83.03%, with a current stock price of $1,064.04, up 2.16% [7][6] - The weight loss drug market is projected to reach nearly $100 billion by the end of the decade, indicating substantial growth potential for Lilly [9] Group 3: Chewy - Chewy operates in the pet e-commerce space, expanding into veterinary services, which broadens its revenue opportunities [10][12] - The company has achieved profitability and 84% of its sales come from its Autoship service, providing predictable revenue [12][11] - Chewy's current market cap is $13 billion, with a gross margin of 28.58% and a stock price of $32.16, reflecting a slight increase of 0.05% [11][10] Group 4: Apple - Apple has underperformed compared to the S&P 500 but is now focusing on AI features, which may attract investors looking for growth [14][15] - The company has a market cap of $3.9 trillion and a gross margin of 46.91%, with a current stock price of $262.36, down 1.83% [15][14] - Apple's services segment is a significant growth area, consistently reporting record revenues [16] Group 5: Moderna - Moderna is identified as a recovery story, facing challenges due to declining vaccine sales but has a promising pipeline of late-stage candidates [18][19] - The company aims to expand its seasonal vaccine offerings from three to six products by 2028 and is working towards cash breakeven [19][20] - Moderna has a market cap of $14 billion, a gross margin of 38.93%, and a current stock price of $35.66, reflecting a 10.85% increase [19][18]

Key Takeaways CHWY Autoship sales hit $2.61B, up 13.6% and representing 84% of total Q3 net sales.Gross margin expanded 50 bps to 29.8% as Autoship mix and disciplined marketing lifted EBITDA 30%.Chewy drove higher order frequency and Autoship use, with paid members delivering margins in line.Chewy, Inc.’s (CHWY) Autoship program is evolving as a key long-term growth driver, as reflected in its third-quarter fiscal 2025 results, which demonstrate the program's strong performance. Autoship generated $2.61 bi ...

Core Insights - Chewy, Inc. is a leading online retailer in the pet products industry, offering a variety of items and subscription services like Chewy+ to enhance customer convenience and savings [1] Financial Performance - Goldman Sachs set a price target of $52 for Chewy, indicating a potential increase of approximately 46.77% from its current price of $35.43, reflecting an optimistic outlook based on strong fiscal performance [2][6] - Chewy's third-quarter earnings report showed earnings of 32 cents per share, surpassing the expected 30 cents, with an 8.3% year-over-year revenue increase to $3.12 billion, driven by unit volume growth rather than price increases [3][6] Customer Metrics - The number of active customers rose to 21.2 million, marking a nearly 5% increase year-over-year, attributed to improved marketing efficiency and higher conversion rates [3] - Autoship sales, crucial for predictability and cost efficiency, grew by 13.6% year-over-year to $2.61 billion, indicating strong demand and customer loyalty [5][6] Market Dynamics - Despite initial market volatility due to fourth-quarter adjusted earnings guidance falling short of expectations, the stock stabilized after management clarified the inclusion of integration costs [4] - Net customer additions improved to 250,000 from 150,000 in the previous quarter, showcasing a positive shift in customer momentum [4]

Financial Data and Key Metrics Changes - Q3 net sales grew over 8% year-over-year to $3.12 billion, primarily driven by unit volume growth, not price [7][12] - Gross margin expanded roughly 50 basis points year-over-year to 29.8%, driven by sponsored ads growth and a strong auto ship baseline [9][12] - Adjusted EBITDA reached $181 million, up 30% year-over-year, with an adjusted EBITDA margin of 5.8%, representing a 100 basis points year-over-year expansion [9][14] - Free cash flow for the quarter was approximately $176 million, up nearly $70 million sequentially [9][14] Business Line Data and Key Metrics Changes - Autoship customer sales increased 13.6% to $2.61 billion, outpacing total company growth [7] - Active customers reached 21.2 million, up nearly 5% year-over-year, with improvements across every part of the active customer funnel [8] - Net sales per active customer reached $595, up nearly 5% year-over-year [8] Market Data and Key Metrics Changes - The company continues to outperform the pet category and expand market share, with profits growing faster than sales [6] - Marketing efficiency continues to strengthen, attracting high-quality customers and improving LTV to CAC ratios [8] Company Strategy and Development Direction - The company aims for a long-term objective of a 10% adjusted EBITDA margin, with ongoing investments in automation and health services [6][21] - Chewy Vet Care (CVC) is driving strong utilization and customer loyalty through high-margin services, with plans to open additional clinics [10] - The acquisition of Smart Equine is expected to enhance Chewy's premium health and nutraceutical assortment [10][11] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the ability to deliver consistent, durable EBITDA expansion over the next several years [20][21] - The company expects to continue taking market share while maintaining disciplined, customer-centric growth [20][21] - For 2026, management anticipates a structural unit volume growth year, with pricing benefits expected to be slightly larger than in 2025 [43][45] Other Important Information - The company repurchased approximately 1.5 million shares for $55 million during the quarter [15] - The company ended Q3 with approximately $675 million in cash and cash equivalents, remaining debt-free [15] Q&A Session Summary Question: How does the team continue to evolve learnings about the lifetime value of customers? - Management discussed the strong intersection between Autoship, Chewy Plus, and CVC, emphasizing their complementary nature in driving customer retention and profitability [26][27] Question: Can you talk about the drivers of active customer growth? - Active customer growth was driven by improvements in customer acquisition and retention, with better experiences on platforms leading to higher conversion rates [33][34] Question: What is the preliminary outlook for demand in 2026? - Management views 2026 similarly to 2025, expecting low single-digit growth in the industry and a focus on share-taking [43][44] Question: Can you discuss trends in gross margins and expectations for 2026? - Management expects continued gross margin expansion driven by various levers, including premium category mixes and the health ecosystem [61][62] Question: How has the Chewy Plus program performed after the price increase? - Conversion rates have remained strong post-price increase, and the program is expected to deliver gross margins in line with the overall enterprise [70][71]

Financial Data and Key Metrics Changes - Q3 net sales grew over 8% year-over-year to $3.12 billion, primarily driven by unit volume growth, not price [7][12] - Gross margin expanded roughly 50 basis points year-over-year to 29.8% [9][12] - Adjusted EBITDA reached $181 million, up 30% year-over-year, with an adjusted EBITDA margin of 5.8%, representing a 100 basis points year-over-year expansion [9][14] - Free cash flow for the quarter was approximately $176 million, up nearly $70 million sequentially [9][14] Business Line Data and Key Metrics Changes - Autoship customer sales increased 13.6% to $2.61 billion, outpacing total company growth [7] - Active customers reached 21.2 million, up nearly 5% year-over-year, with improvements across every part of the active customer funnel [8] - Net sales per active customer reached $595, up nearly 5% year-over-year [8] Market Data and Key Metrics Changes - The company continues to outperform the pet category and expand market share, with profits growing faster than sales [6] - Marketing efficiency continues to strengthen, attracting high-quality customers and improving LTV to CAC ratios [8] Company Strategy and Development Direction - The company aims for a long-term objective of a 10% adjusted EBITDA margin, with ongoing investments in automation and health services [6][21] - Chewy Vet Care (CVC) is driving strong utilization and customer loyalty through high-margin services, with plans to open 8-10 locations this fiscal year [10] - The acquisition of Smart Equine is expected to enhance Chewy's premium health and nutraceutical assortment and strengthen its position in high-value wellness categories [10][11] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the company's ability to deliver consistent, durable EBITDA expansion over the next several years, with a focus on disciplined, customer-centric growth [20][21] - The company expects 2026 to be characterized by structural unit volume growth, with potential pricing benefits slightly larger than in 2025 [43][45] Other Important Information - The company repurchased approximately 1.5 million shares for $55 million during the quarter [15] - The company ended Q3 with approximately $675 million in cash and cash equivalents, remaining debt-free [15] Q&A Session Summary Question: How does the team continue to evolve learnings about the lifetime value of customers? - Management discussed the strong intersection between Autoship, Chewy Plus, and CVC, emphasizing their complementary nature in driving customer retention and profitability [26][27] Question: Can you talk about the drivers of active customer growth? - Management noted that active customer growth was driven by improvements in customer acquisition and retention, with higher direct traffic and better conversion rates [33][34] Question: What is the outlook for demand in 2026? - Management views 2026 similarly to 2025, expecting low single-digit industry growth and stable pricing dynamics [43][44] Question: How should we think about gross margins going forward? - Management indicated that gross margin expansion opportunities remain, with several levers expected to contribute to growth [61][62] Question: What changes have been observed in retention after raising the Chewy Plus fee? - Management reported that conversion has remained strong post-price increase, with paid Chewy Plus members delivering gross margins in line with the overall enterprise [70][71]

Financial Data and Key Metrics Changes - Q3 net sales grew over 8% year-over-year to $3.12 billion, driven primarily by unit volume growth rather than price increases [5][10] - Gross margin expanded approximately 50 basis points year-over-year to 29.8%, supported by growth in sponsored ads and a favorable category mix [7][10] - Adjusted EBITDA reached $181 million, up 30% year-over-year, with an adjusted EBITDA margin of 5.8%, representing a 100 basis points year-over-year expansion [7][11] - Free cash flow for the quarter was approximately $176 million, up nearly $70 million sequentially [7][11] Business Line Data and Key Metrics Changes - Autoship customer sales increased 13.6% year-over-year to $2.61 billion, outpacing total company growth [5] - Active customers reached 21.2 million, up nearly 5% year-over-year, with improvements across the customer funnel [6] - Net sales per active customer reached $595, up nearly 5% year-over-year [6] Market Data and Key Metrics Changes - The company continues to outperform the pet category and expand market share, with profits growing faster than sales [5] - Marketing efficiency has improved, with enhanced mobile app functionality lifting direct traffic and increasing app customers and orders by approximately 15% year-over-year [6] Company Strategy and Development Direction - The company aims for a long-term objective of a 10% adjusted EBITDA margin, with ongoing investments in automation and health services [5][19] - Chewy's health offerings, including Chewy Vet Care, are driving strong utilization and customer loyalty, with plans to open additional clinics [8] - The acquisition of Smart Equine is expected to enhance Chewy's premium health and nutraceutical assortment, strengthening its position in high-value wellness categories [9] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the company's ability to deliver consistent, durable EBITDA expansion over the next several years, supported by a unique operating model [18] - The company anticipates a structural unit volume growth year in 2026, with expectations for pricing improvements to be slightly larger than in 2025 [40][42] - Management noted that the active customer growth reflects both improved acquisition and retention strategies, with a focus on deepening customer engagement [32] Other Important Information - The company repurchased approximately 1.5 million shares for $55 million during the quarter, ending with $304.9 million of remaining authorization under its repurchase program [13] - The company remains debt-free with total liquidity of approximately $1.5 billion [13] Q&A Session Summary Question: How does the team continue to evolve learnings about customer lifetime value? - Management discussed the strong intersection between Autoship, Chewy Plus, and Chewy Vet Care, emphasizing their complementary nature in driving customer retention and profitability [22][24] Question: What are the drivers behind the strong active customer growth? - Management attributed the growth to higher direct traffic, increased engagement in the mobile app, and improved conversion rates across platforms [30][32] Question: What is the outlook for demand in 2026? - Management expects 2026 to resemble 2025, with low single-digit industry growth and a focus on share-taking strategies [40] Question: How should gross margins be viewed going forward? - Management indicated that approximately half of the long-term EBITDA margin expansion will come from gross margin improvements, with several levers available for growth [58] Question: What changes have been observed in retention after raising the Chewy Plus fee? - Management reported that conversion rates remained strong after the price increase, exceeding internal expectations [65]

Core Viewpoint - Chewy Inc is expected to report strong growth in the pet care sector with its upcoming third-quarter financial results, highlighting revenue and customer growth potential [1]. Financial Performance - Analysts estimate Chewy's third-quarter revenue to be $3.10 billion, an increase from $2.88 billion in the same quarter last year, marking a growth of approximately 7.6% [2]. - The expected earnings per share (EPS) for the third quarter is 12 cents, down from 20 cents per share in the previous year [3]. - Chewy has consistently beaten revenue estimates in three consecutive quarters and in seven of the last ten quarters [2]. Analyst Insights - JPMorgan analyst Doug Anmuth anticipates strong third-quarter results and full-year guidance, maintaining an Overweight rating with a price target of $45 [4]. - Anmuth projects Chewy will add over 160,000 active customers in the third quarter and 718,000 for the full fiscal year [4]. - Bank of America Research highlights the pet care sector as a recent e-commerce winner, suggesting continued demand could benefit Chewy [6]. Customer Metrics - Key areas to monitor include customer additions and the performance of Autoship customers, which saw a 14.9% year-over-year increase in sales to $2.58 billion, representing over 80% of Chewy's total sales [7]. - The company previously raised its full-year sales guidance after the second quarter, and further increases are anticipated [9]. Market Sentiment - Chewy's stock has faced downward pressure, trading down 1.01% at $34.27, with a year-to-date increase of 2.6% [9]. - Recent analyst ratings include a Neutral rating from UBS with a lowered price target of $41, a Buy rating from Citigroup with a target of $42, and an Outperform rating from Mizuho with a target of $50 [8].

Core Insights - Chewy, Inc.'s active customer base is showing signs of reacceleration, ending Q2 fiscal 2025 with 20.9 million active customers, a 4.5% year-over-year increase, and adding 150 thousand customers sequentially [1][5] Customer Growth - The growth in active customers is primarily driven by the Autoship subscriptions and Chewy+ program, with Autoship sales rising nearly 15% to $2.58 billion, accounting for 83% of total net sales in Q2 [2][9] - Chewy's Net Sales Per Active Customer (NSPAC) increased by 4.6% year-over-year to $591, indicating a rise in customer spending [3][9] Customer Engagement - Chewy+ members exhibit stronger Autoship participation and higher mobile app engagement compared to non-members, contributing to robust NSPAC growth for Chewy+ customers [3][5] - Management noted improvements in gross subscriptions added to Autoships and better retention rates for repeat orders, suggesting enhanced customer loyalty and engagement [4][9] Financial Performance - Chewy's second-quarter results reflect a re-acceleration in active customers, with high Autoship adoption and increased NSPAC indicating a solid foundation for future growth [5] - The Zacks Consensus Estimate for Chewy's fiscal 2026 and 2027 earnings implies year-over-year growth of 22.1% and 20.7%, respectively [11]