The institutions took some big bites of Chewy, Inc (NYSE: CHWY) over the last two years driving the institutional ownership up to nearly 100%. This is quite a feat considering the short interest is also running near 25% so there are quite a few shares on the market. The net of institutional activity, however, shifted in favor of the bears in calendar Q2 so don’t start thinking a short-squeeze is about to happen. Not only did the intensity of institutional selling increase from Q2 to Q3 but the earnings results are not a catalyst for higher prices. If anything, the Q2 earnings release will only intensify the short-selling and the institutional selling and drive the stock back down to its recent lows. The question is if the market will hold at those lows or if this stock is headed down to the single digits.
Chewy Reports Strong, Guides Weak
Chewy reported a solid quarter with revenue growth of 12.5% but this may be the last quarter of strong growth. The $2.43 billion in revenue missed the consensus figure by 80 basis points and the commentary is not favorable. Company CEO Sumit Singh said consumers are pulling back on discretionary items and the guidance was reduced. As far as Q2 goes, revenue strength was driven by a 14.4% increase in net spending per active customer and a 2.1% increase in active customers offset by a decline in new customer acquisitions. Active customers now top 20.1 million and are driving strong gains in the auto-ship segment of the business which is the key for investors. Autoship grew by 17.3% YOY and accounted for 73.1% of the revenue.
Moving down to the margin, the news gets better but it is still overshadowed by the guidance. The company said the gross and operating margins both widened with the net margin up 170 basis points versus last year. This drove EPS of $0.05 per share which is well above expectation and beat the consensus by $0.16. The bad news is that guidance for Q3 is light and the full-year outlook was reduced to a range below consensus.
The company is now expecting only $9.95 billion in FY revenue, down from $10.3 billion, and below the $10.26 billion consensus estimate. Assuming consumer trends continue to deteriorate as they have been, the guidance could be overly optimistic. The company also reported a 40% increase in YOY inventory that could play a role in margin compression later in the year if discounting and clearance actions come into the picture.
Analysts Trim Targets For Chewy, Inc
The analysts are trimming their targets for Chewy, Inc share prices but the sentiment is still bullish. The analysts rate the stock a Moderate Buy and have for the last year but the price target is falling. The consensus price target is down 50% in the last 12 months but still 50% above the price action so there will be a rebound in the action at some point. The takeaway from the analyst chatter is that near-term headwinds are impacting the business but the long-term growth outlook remains intact.
The Technical Outlook: Chewy Might Be Bottoming
Chewy, Inc might be bottoming but the move is still in play so there is ample risk in the outlook. The stock bounced from the $22.50 level earlier this year and is headed back to that level now. If support kicks in at $22.50 or higher investors should expect the price action to enter a trading range if not move higher. If the market can’t hold the price up at $22.50, however, shares of Chewy, Inc could be heading down to the single-digit range.
Companies in This Article:
| Company | Current Price | Price Change | Dividend Yield | P/E Ratio | Consensus Rating | Consensus Price Target |
|---|
| Chewy (CHWY) | $33.41 | +0.4% | N/A | 95.37 | Moderate Buy | $46.17 |
Experience
Thomas Hughes has been a contributing writer for InsiderTrades.com since 2019.
- Professional Background: Thomas Hughes is the Managing Partner of Passive Market Intelligence LLC, a market research platform he launched in 2023 with the mission: “We watch the market so you don't have to.” He has worked as a blogger, stock market commentator, and independent analyst since 2010 and has been actively involved in trading and investing since 2005.
- Credentials: He holds an Associate of Arts in Culinary Technology—training that honed his discipline, attention to detail, and ability to anticipate outcomes, all of which carry over into his work as a market analyst.
- Finance Experience: Thomas has been writing about finance and investing since 2011, when he discovered it could be more than a personal passion—it could be a profession. He’s been a contributing writer for InsiderTrades.com since 2019.
- Writing Focus: He specializes in the S&P 500, small-cap stocks, dividend and high-yield strategies, consumer staples, retail, technology, oil, and cryptocurrencies. His analysis blends chart-based technical setups with key fundamental insights, helping readers identify actionable trends.
- Investment Approach: Thomas takes a hybrid approach that combines technical analysis with deep fundamental research. He often writes about macroeconomic shifts, earnings trends, and sentiment-based trading signals.
- Inspiration: Thomas first became interested in stocks after attending a seminar on how to buy and sell your own shares. That event opened his eyes to the market's potential and sparked a lifelong interest in investing.
- Fun Fact: Thomas took up model railroading by accident a few years ago—and now he can’t stop running the rails.
- Areas of Expertise: Technical and fundamental analysis, S&P 500, retail and consumer sectors, dividends, market trends
Education
Associate of Arts in Culinary Technology
