Chewy Inc recently held its Investor Day, where they discussed their future sales growth and financial goals. 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 tapped into half of the Health TAM (Total Addressable Market), which includes $4 billion in insurance and $18 billion in products. She highlights that over 20% of active customers have purchased from Chewy’s pharmacy, and as the pharmacy TAM shifts online, Chewy is well-positioned to benefit financially.
Andreeva also mentions that out of a potential pool of 50 million new customers, 18% (12 million) are considered high-value prospects, while 62% (41 million) fall into the mid-value category.
Needham reiterates their Buy rating for Chewy and raises their price target from $20 to $25.
As the pet industry continues to shift towards online platforms and away from mass market and food, Chewy is expected to experience growth. However, they still face competition from Amazon.com Inc.
Chewy’s Autoship feature, which accounts for 75% of their sales, has helped cultivate a highly loyal customer base that spends over $1,000 annually.
With the recent inclusion of clinics, Chewy can now tap into an NSPAC (Non-Surgical Pet Aesthetic Center) opportunity worth up to $1,700. This allows them to address a larger portion of the $500-$600 pet health spend, as they previously only captured half of this potential market.
In terms of price action, CHWY shares are currently up 4.63% at $21.13.