$CHWY Is A Speculative Buy

12 de dez. de 2019

CHWY is a speculative buy. We are labelling it as speculative because of all the unicorns that have IPO'd this year and have performed horribly. However, a number of people are coming out and saying that the stock is interesting, including Whitney Tilson and Credit Suisse.

Credit Suisse thinks Chewy's (NYSE:CHWY) revenue momentum will translate into profitability down the road.

The firm notes that shares currently trade at only 1.6X the 2020 EV/sales estimate, which it calls a "de minimis premium" to its $22 listing price and a "notable discount" to a broader peer group of e-commerce retail platforms (4.6X), animal health products and services (3.4X), as well as healthcare IT services companies (3.7X). The analyst team says the Chewy share price doesn't fully reflect the rapid growth trajectory and longer-term profit opportunity.

CS has an Outperform rating on Chewy and price target of $29.

In recent trading action, there were concerns over lockup expiration.

Shares of Chewy (NYSE:CHWY) are up 5.22% on the day and are now 17.21% higher over the last five sessions.

On the positive side of the ledger, William Blair was out with positive comments today and The Wall Street Journal's Heard On The Street column maintains that the 1.7 forward sales multiple on Chewy is not unreasonable for a rapidly growing company.

Perhaps most importantly, the expiration of the Chewy IPO lockup period hasn't created a wave of selling today.

Chewy, Inc., together with its subsidiaries, engages in the pure play e-commerce business in the United States. The company provides pet food, pet products, pet medications, and other pet health products for dogs, cats, fish, birds, small pets, horses, and reptiles through its chewy.com retail Website, as well as its mobile applications. It offers approximately 45,000 products from 1,600 partner brands. The company was founded in 2010 and is headquartered in Dania Beach, Florida. Chewy, Inc. is a subsidiary of PetSmart, Inc.

As always, use protective stops and trade with caution.

Good luck to all!