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 are confident in achieving a long-term adjusted EBITDA margin of 10% and anticipate 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 the pharmacy TAM shifts online, Chewy will benefit across the P&L. Over 20% of active customers have already made purchases from Chewy’s pharmacy.
Needham reiterates their Buy rating for Chewy and has raised their price target from $20 to $25. They believe that Chewy is well-positioned for growth as the pet industry moves towards online platforms and away from mass market and food. However, they acknowledge that Amazon remains a strong competitor.
Chewy’s Autoship feature, which makes up 75% of their sales, has helped them cultivate a highly loyal customer base that spends over $1,000 annually. With the addition 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.
In terms of stock performance, CHWY shares are currently up 4.63% at $21.13.