Chewy Q3 Earnings Preview: Strong Growth Expected Amid Analyst Optimism

Chewy, the online pet products retailer, is set to announce its Q3 Fiscal 2024 earnings before the market opens on December 4. Analysts anticipate a strong performance, projecting earnings per share (EPS) of $0.06—a marked improvement from the $0.08 loss in the same quarter last year. Revenue is also expected to rise over 4% year-over-year to $2.86 billion.

Peer Comparisons:Chewy's competitors in the online retail space have set a positive tone for Q3 results. Carvana reported impressive year-over-year revenue growth of 31.8%, beating estimates by 5.3%, while Revolve posted a 9.9% revenue increase, exceeding expectations by 4.4%. Given Chewy's track record—missing Wall Street revenue estimates only once in the past two years and averaging a 1.4% outperformance—it's reasonable to expect solid results.

Analyst Confidence:Recently, Bank of America analyst Curtis Nagle upgraded Chewy's stock from Sell to Buy and raised the price target significantly from $24 to $40. Despite a decline in overall pet spending, Nagle highlighted positive industry trends such as improved pet adoption rates in 2024, signaling a potential recovery. Additionally, Chewy's focus on cost management, higher-margin services like ads and health offerings, and increasing web traffic are seen as indicators of stronger customer acquisition and revenue growth.

Meme Stock Sentiment:Chewy remains popular among retail investors, often referred to as a meme stock. However, sentiment took a hit when WSB forum influencer "Roaring Kitty" sold his entire 6.6% stake in October, after initially boosting interest earlier in the year. While this impacted some retail sentiment, the company's fundamentals and financial performance will ultimately determine its stock trajectory.

Conclusion:With strong analyst support, operational improvements, and a promising revenue outlook, Chewy is well-positioned for a positive earnings report. While meme stock dynamics may influence short-term sentiment, the focus should remain on Chewy's long-term fundamentals, which appear to be strengthening.