Chewy Stock Trading at a Premium: Is the Best Buying Window Over?

Core Insights - Chewy Inc. has experienced a 6% increase in stock value over the past month, closing at $37.01, which is 5.3% below its 52-week high of $39.10 [1][7] - The stock is currently trading at a forward 12-month P/E multiple of 29.97X, above the industry average of 25.96X, raising questions about the potential for further upside [1][4] - The company is projected to achieve net sales between $11.79 billion and $11.81 billion for fiscal 2024, reflecting an approximate 6% year-over-year growth [10] Financial Performance - Chewy's Autoship program generated $2.3 billion in sales during the third quarter, accounting for 80% of net sales and showing an 8.7% year-over-year increase [11] - The active customer base grew by 160,000 in the third quarter, reaching 20.2 million, with net sales per active customer increasing by 4.2% year-over-year to $567 [14] - The adjusted EBITDA margin expanded to 4.8% in the third quarter, but guidance for the fourth quarter indicates a decline to 3.4% due to higher seasonal marketing costs [18] Market Position and Strategy - Chewy has entered the veterinary services market with Chewy Vet Care, targeting a $25 billion addressable market and operating six veterinary clinics [15] - The company's sponsored ads business is on track to meet its long-term target range of 1-3% of net sales by fiscal 2024, contributing to gross margin improvement [16] - Chewy's expansion into the Canadian market is showing positive results, with improvements in Autoship penetration and net sales growth [16] Challenges and Outlook - Analysts have revised earnings estimates downward, with the Zacks Consensus Estimate for fiscal 2024 now at $1.08 per share, down from previous estimates [21] - The company faces challenges such as slowing growth, potential customer acquisition saturation, and rising cost pressures in a price-sensitive market [17][19] - Elevated advertising and marketing expenses reached $191.8 million in the third quarter, which could strain profitability if revenue growth does not accelerate [20]