Should You Buy, Hold or Sell Chewy Stock Before Q1 Earnings?

Chewy Inc. (CHWY) is set to release its Q1 fiscal 2025 earnings on June 11, with revenue expected to grow 6.9% year-over-year to $3.08 billion and EPS projected to increase 9.7% to $0.34. The company's growth is attributed to its Autoship program, expansion of its ad platform, and rollout of vet services, contributing to a 22.1% stock rally over the past month, outperforming its industry. Despite a favorable valuation with a forward 12-month price-to-sales ratio of 1.57 compared to the industry average of 2.00, the Zacks model does not conclusively predict an earnings beat, suggesting investors may want to await post-earnings confirmation.

Analysis

Chewy Inc. (CHWY) is poised to report its first-quarter fiscal 2025 earnings on June 11, with analysts anticipating revenue of $3.08 billion, a 6.9% year-over-year increase, and earnings per share of $0.34, up 9.7% from the prior year. The company's growth trajectory is underpinned by its Autoship program, which fosters recurring revenue, the expansion of its in-house sponsored ad platform contributing to higher margins, and the strategic rollout of veterinary services aimed at enhancing customer acquisition and engagement. Chewy's active customer base is projected to reach 20.5 million, reflecting success in user growth and retention, further supported by an expected 5.7% increase in Consumables net sales and a 6.1% rise in Hardgoods net sales. Despite a strong historical earnings surprise, averaging 19.3% over the trailing four quarters and a 33.3% beat in the last reported quarter, the Zacks model, with a Rank #3 (Hold) and an Earnings ESP of 0.00%, does not conclusively predict an earnings beat for the upcoming quarter. CHWY's stock has demonstrated significant recent momentum, rallying 22.1% over the past month and outperforming the industry's 1.2% rise, as well as competitors Central Garden & Pet (CENT), Petco (WOOF), and BARK, Inc. (BARK), which saw declines. From a valuation perspective, Chewy's forward 12-month price-to-sales ratio of 1.57 is below the industry average of 2.00, suggesting a potentially attractive entry point, though it trades at a premium to the aforementioned direct competitors. The company's ongoing investments in automation and its high-margin ventures signal a commitment to long-term growth and operational efficiency.

Key Decisions for Investors

• Given Chewy's solid revenue growth expectations, expanding customer base, and strategic initiatives like Autoship and vet services, investors should monitor the upcoming Q1 earnings for confirmation of these positive trends.
• Despite the recent significant stock price appreciation of 22.1% and a relatively attractive valuation compared to its industry, the Zacks model's lack of a conclusive earnings beat prediction warrants a degree of caution; existing investors might consider holding their positions.
• Potential new investors may find it prudent to await the Q1 earnings release and subsequent market reaction to assess the company's performance against expectations and gain further clarity before establishing a position, particularly as the stock has already experienced a notable rally.