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Should We Invest In Chewy, Inc Again?



Key Points
Chewy.com recently received an upgrade from Goldman Sachs, indicating a potential reversal in the market.
The company is expected to show significant growth and outperform expectations.
If the stock breaks to a new high, it may lead to a sustained rally.
There are other stocks that may be more appealing than Chewy.
There seems to be a brewing reversal for Chewy, Inc (NASDAQ: CHWY) stock. Following an upgrade from Goldman Sachs, the company’s recent strengths are being highlighted, suggesting a complete reversal might be on the horizon. If this occurs, the market could regain the top of its consolidation range and reach new highs.
If the upcoming earnings reports confirm the expected strengths, Chewy, Inc stock could potentially double in value by early 2024.
Goldman Sachs analysts have upgraded Chewy, citing a more favorable risk-to-reward profile with the current share price. The firm is increasingly optimistic about Chewy’s ability to maintain a 10% or better top-line growth. Furthermore, there are opportunities for significant outperformance through growth channels such as international expansion, sponsored ads, and insurance. The analysts also see potential for Chewy’s margins to expand due to supply chain improvements and emphasis on private label brands.
The upgrade from Goldman Sachs has added to the positive outlook for Chewy, as it was previously viewed favorably by other analysts. Marketbeat.com has been tracking the stock and reports a “Moderate Buy” rating from 20 analysts. However, the price target has declined by 15% in the past year.
While the price target is relatively firm compared to last month, it represents a 30% increase from the pre-upgrade price action. Institutional activity also suggests a positive sentiment, with large private owners and institutions holding about 97.5% of the stock and consistently buying over the past year.
Chewy is expected to report its Q2 results in late August. While there has been a recent lowering of revenue and earnings targets by five analysts, the consensus still expects revenue growth to accelerate to 13% compared to the previous year. Additionally, adjusted earnings are anticipated to double and may surpass the consensus by a significant margin.
Furthermore, a recent channel check suggests that Chewy.com’s sales could exceed expectations, with a 19% increase in app downloads compared to its peers.
Following the upgrade, Chewy.com shares rallied and gained over 5.0% in premarket trading. The move confirms support at the 150-day EMA and indicates the potential for further gains. If the market follows through on this signal, the stock may reach the top of its range near $50. A move above $50 would be bullish and could potentially push the stock up to $60 and $70 by the end of the year.
It’s worth noting that while Chewy is viewed favorably by analysts, there are other stocks that may be considered better investments.

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