Chewy’s Strong Market Position and Growth Potential Justify Buy Rating Despite Increased Advertising Expenses

Bank of America Securities analyst Curtis Nagle has reiterated their bullish stance on CHWY stock, giving a Buy rating on May 28.

Curtis Nagle has given his Buy rating due to a combination of factors that highlight Chewy’s strong market position and growth potential. Despite the company’s 1Q EBITDA estimate being slightly below Street expectations due to increased advertising expenses, Nagle sees potential for growth in net customer additions and significant market share gains. Chewy’s strategic investments in marketing are expected to drive customer acquisition and retention, as indicated by increased gross additions and declining churn rates.
Moreover, Chewy’s projected revenue growth of 7.4% year-over-year stands out in an industry where overall pet spending has declined. This growth is supported by data showing Chewy’s web traffic and app downloads outperforming competitors like PetSmart and Petco. Additionally, Chewy’s ability to expand net sales per active customer through customer maturation and cross-selling health products further supports its premium valuation. Given these factors, Nagle maintains a positive outlook on Chewy’s ability to continue gaining market share, justifying the Buy rating and an increased price objective of $49.

In another report released on May 28, Barclays also maintained a Buy rating on the stock with a $50.00 price target.