Should I Buy Chewy (CHWY)? Finance YouTuber Analysis

The analyst believes Chewy stock presents a buying opportunity for long-term investors, especially below $25 per share. This is due to its attractive valuation on a forward price-to-earnings and price-to-operating cash flow basis, as well as its current trading price being significantly below his calculated fair value of $34. Despite near-term headwinds from a challenging consumer environment and lower sales outlook, the company's management has shown effective handling of the business, improving gross profit margins and cash flow from operations.

“Chewy stock does look like a great buying opportunity on the dip. At any price below $25 per share, Chewy stock looks attractive for long-term investors.”

The analyst views Chewy as a solid long-term investment due to its position in the growing pet industry and the shift to e-commerce. Despite slowing overall sales growth, its auto-ship feature shows strong recurring revenue and customer loyalty, and the company is improving its profitability margins.

“it is a solid long-term bet on both the pet industry spending and a shift to e-commerce”

The analyst suggests Chewy as a potential beneficiary of 'greedflation' because consumers tend to remain loyal to pet products even during economic downturns. This allows companies in this sector to maintain or increase profit margins by passing on price increases.

“So look at uh shares of companies like Chewy, like uh like Constellation Brands, which is going to be reporting its earnings this week for companies that are going to benefit from this wave of greedflation.”

The YouTuber suggests Chewy as a buy, highlighting its dominance in the online pet food and medication market with a subscription-driven model. The company has a strong market share, significant growth potential in the underpenetrated online pet market, and a healthy balance sheet with positive cash flow from operations, trading at a much lower price-to-sales ratio than its 2020 valuation.

“it's now trading for just 1.7 times on that price to sales basis again less than half the 2020 valuation with a long Runway of growth ahead”

Chewy is highlighted as a potential short squeeze candidate due to its strong revenue growth in a mature industry and a solid balance sheet with net cash. The YouTuber also points to high insider ownership, which limits the float available for short sellers and could amplify a squeeze.

“two things really struck out to me with chewy one is this balance sheet with 604 million dollars in cash against just 436 million in debt so so net cash positive along with a positive cash flow so there's really very little risk on the debt here also besides that high institutional ownership of the shares nearly 20 of the shares are owned by insiders which doesn't leave a whole lot of room for that 34 of the shares that are borrowed and shorted”

The YouTuber recommends Chewy as a stock to buy when tech stocks sell off. He believes that as the S&P 500 potentially drops, these stocks will shoot up, providing a counter-cyclical opportunity.

“chewy is another one on one of your radar guy this one is sitting at $26.97 same thing way down here here $24 shot all the way up here $28 $27.50 it Clos that these kind of moves will run your account through the roof”

The analyst is bullish on Chewy long-term, viewing it as a turnaround play despite being down 84% from its peak. He highlights improving financials, a shift to profitability, and a strong recurring revenue base (75% from subscriptions). The company's niche focus in pet e-commerce, loyal customer base, and potential for margin expansion through operational efficiency are key drivers, making its current valuation (EV/Sales of 0.7, EV/FCF under 30) compelling if margins improve.

“I think long term that's the play for chewy and that's the reason this could be a phenomenal stock to own.”