Today's surge in Chewy's stock price was noteworthy.
Chewy's shares saw a 5% surge around 12:45 p.m. ET on a Friday, as per S&P Global Market Intelligence data. This uptick followed five consecutive price target boosts in December and Chewy's first upgrade of the year from Wolfe Research, classifying it as a top pick for 2025.
Despite Chewy's stock nearly doubling from its 2024 lows, experts like Wolfe Research are optimistic about the retail giant's prospects. They cite factors such as the growth of its Chewy Health business, an array of private-label products, soaring ad revenue, and enhanced profit margins.
These factors align with my earlier observations about why Chewy was an excellent investment choice. Despite a slight decrease in its active customer count, from 20.7 million in 2021 to 20.2 million today, Chewy's gross profit margin has strengthened by four percentage points, and it's now moving towards break-even profitability.
My favorite reason for Chewy's continued profitability growth is its planned expansion into vet care clinics. With six facilities open and eight set to operate by year-end, these clinics not only offer increased margins but also attract new customers to the Chewy ecosystem.
Chewy's beloved status among pet owners and veterinarians gives it an edge in the industry, as it disrupts the veterinary market dominated by private equity. With a relatively modest valuation of 1.35 times sales, Chewy doesn't need to grow exponentially to justify its valuation. Instead, it merely needs to boost profitability, a goal it seems well-positioned to achieve.
Sources:- [1] MarketWatch- [2] S&P Global Market Intelligence- [3] Stockscreen.com
- The uptick in Chewy's shares could be attributed in part to the retailer's strong financial performance, including its focus on investing in areas like Chewy Health and private-label products.
- Despite some fluctuations in its active customer count, Chewy's expanded offerings in finance and veterinary services have contributed to its improved gross profit margin, making it an attractive investment choice for many.
- As a top pick for 2025 by Wolfe Research, Chewy's stock is expected to continue surging in value, given its strong growth prospects and the potential for increased revenue from its vet care clinic expansion.
- With its modest valuation and potential for profitability growth, Chewy stands out in the retail and veterinary industries, offering chewy returns for investors looking beyond the short term.
