While there are no guarantees in Wall Street analysts’ price targets, they can be a great starting point to find promising investments. One stock that recently caught my attention was e-commerce-focused pet retailer Chewy (NYSE: CHWY).
The stock currently trades at around $16 per share, but Wall Street analysts are quite upbeat on the stock, maintaining an average price target of $31.62. That implies a 97% upside potential. Recently, the company received updated buy ratings from analysts Eric Sheridan of Goldman Sachs and Trevor Young of Barclays, who set price targets of $36 and $30, respectively.
After examining Chewy’s recent results, along with the strategy that management outlined during its investor day in December, I can’t help but agree with Wall Street. Down 86% from its all-time highs, Chewy looks like an outstanding growth stock to buy at its current all-time-low valuation.
The No.1 specialty pet retailer in the U.S.
Despite only being founded in 2011, Chewy has grown to account for roughly one-third of the online pet retail market, generating over $11 billion in sales over the past year. Tripling its sales and nearly doubling its active-customer base to 20.3 million since its initial public offering (IPO) in 2019, Chewy’s operations have been booming.
However, following a pandemic-aided spike that saw revenue rise by 50% in 2021, the company’s sales growth decelerated to just 8% in its most recent quarter. This dramatic slowdown explains the market’s souring attitude toward the stock, but numerous reasons for excitement about the business’s growth potential remain.
First, Chewy operates in an incredibly resilient $144 billion pet retail industry that is expected to grow by 6% annually through 2027. While recent revenue-growth figures have been dipping, they should begin to stabilize.
To help quantify the stability in the company’s sales figures, consider that 85% of its revenue comes from non-discretionary consumables and healthcare products. These required (and typically repeating) sales help explain how Chewy generates an impressive 76% of its revenue…
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