Is Chewy a buy after sell off?

It’s time to break down another e-commerce name. Here is the break down on $CHWY, otherwise known as Chewy.

Current Price: $86.15

52/Wk High: $120.00

52/Wk Low: $30.02

Market Cap: $33.28 Billion

Read below for the breakdown!

Chewy ($CHWY) is a major e-commerce company that operates an online platform and application selling pet foods and supplies.

Given retail’s shift to digital, Chewy experienced a major boost from the COVID-19 pandemic, in turn pushing the stock price greater than 165% to the upside over the past year.

While Chewy’s stock has seen huge upside due to the pandemics tailwinds the NASDAQ sell off has sent the stock tumbling a whopping -20% throughout recent weeks, leaving investors to wonder if a buying opportunity is upon them.

Digging into the numbers Chewy beat Q3 expectations with an EPS of $-0.08, better than the analysts EPS consensus estimate of $-0.13. On a year over year basis, EPS improved 60%.

As for sales, Chewy delivered $1.78 billion in net sales, representing a 44.9% increase on a year over year basis. Furthermore, net sales per active customer jumped by 2.8% year over year to $363/active customer.

When it comes to customer count, Chewy reported a strong 17.8 million active customer count, representing an impressive 39.8% jump in active customers year over year.

Shifting into margins, Chewy reported a gross margin of 25.5%, representing a 180 basis point jump from Q3 2019. Not only that, but leadership also reported a net margin of -1.8%, 480 basis points better than the Q3 2019 level.

While the numbers were solid, Chewy continued to run a net loss of $32.8 million, but the loss was considerably smaller than the Q3 2019 loss of $79 million.

As for EBITDA (Earnings before Interest,Taxes, Depreciation, and Amortization) Chewy reported an adjusted EBITDA of $5.5 million, representing a strong 118.2% increase year over year.

On a final EBITDA note, the adjusted EBITDA margin for Q3 2020 totaled 0.3%, representing a 280 basis point increase year over year.

Rounding out the quarter, Chewy reported net cash provided by operating activities totaled $63.4 million, representing a huge jump from the minimal 2019 Q3 level of $1.6 million.

Shifting into the balance sheet, the numbers need work.

Total Debt: None

Total Liabilities: $1.700 Billion

Total Assets: $1.643 Billion

Cash & Short Term Inv: $506 Million

On a valuation basis, Chewy does trade at a premium.

Price to Sales: 5.15x

Leadership could be more effective as well.

Return on Assets: -13.95%

Return on Invested Capital: -203.16%

Given the numbers the analysts are bullish with a mean price target of $98.14/share, representing a 14.28% gain.

The high price target is $121.00/share, representing a 40.89% upside, while the low price target is $75.00/share, representing a -12.67% downside.

The big money is quite involved as well with 82.96% of Chewy being owned by institutions. Top holders include Argos Holdings, Morgan Stanley Investment Management, and Baillie Gifford &Co..

On a technical basis Chewy could be presenting opportunity. According to the six month charts the MACD is attempting to move back to the upside within a tight range around -5.4374.

The six-month charts are also indicating an RSI of 44.06 and CCI of -29.4098, both of which are on the low end.

In short, Chewy ($CHWY) is a solid company with expanding sales and a growing customer base but still has issues to work out. Overall, it's a solid long term play in the e-commerce space.

EAT - SLEEP - PROFIT

Disclaimer: This is not direct financial advice, simply an opinion based on independent research.