Chewy Inc recently held its Investor Day, where they discussed their future plans. The company expects their sales growth for FY24 to be below their long-term target of a high single-digit percentage. However, they anticipate a long-term adjusted EBITDA margin of 10% and are confident in delivering margin accretion in FY24, regardless of the macro environment.
According to Needham Analyst Anna Andreeva, Chewy has only focused on half of the Health TAM, which includes $4 billion in insurance and $18 billion in products. She believes that as more customers shift to purchasing pharmacy products online, Chewy will benefit financially. In fact, over 20% of active customers have already made purchases from Chewy’s pharmacy.
Needham reiterates their Buy rating for Chewy and has increased their price target from $20 to $25. They believe that as the pet industry continues to move towards online platforms and away from mass market and food, Chewy is well-positioned for growth. However, they do acknowledge that Amazon remains a strong competitor.
One of Chewy’s key features is Autoship, which makes up 75% of their sales. This feature has helped cultivate a highly loyal customer base that spends over $1,000 annually. Additionally, with the inclusion of clinics, Chewy can now tap into an NSPAC opportunity worth up to $1,700, allowing them to address a larger portion of the $500-$600 pet health spend.
As of Friday’s closing, CHWY shares were up 4.63% at $21.13.