Chewy’s stock jumps after Wedbush analyst recommended buying


Shares of Chewy Inc. CHWY, -4.46% ran up 5.0% in premarket trading Tuesday, after Wedbush analyst Seth Basham recommended investors buy, citing a more favorable risk-versus-reward profile following the sharp selloff this year. The online pet products seller was upgraded to outperform from neutral, and the stock price target was raised to $35 from $30, with Basham citing “relatively favorable” pet category dynamics, “bottoming” ecommerce trends and “attractive” valuation. The stock had plummeted 51.3% year to date through Friday, while the S&P 500 SPX, +0.22% has dropped 22.9%. Basham also believes the worst of the higher-than-average churn in customers the company has recently experienced is likely over. “Customer churn should materially improve in FY23 with the largest retention headwinds in the rearview mirror,” Basham wrote in a note to clients. “Further, we expect gross customer add challenges to ease in 2H22 as competitors adjust their advertising and acquisition strategies, and shoppers seek value in the online channel, keeping [Chewy] customer acquisition costs (CAC) under control.”

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