Goldman Sachs upgrades Chewy’s rating

Online pet retailer Chewy has made headlines again as investments in the company grow. Chewy’s stocks have gained 2.4% this year, which has sparked interest from analysts. 

Investment banking group Goldman Sachs highlighted Chewy’s “growth potential” and has moved the retailer’s stock from ‘neutral’ to ‘buy’ indicating to investors that analysts are optimistic about the firm’s stocks prospects. 

The process commonly draws more investors eager to buy shares in companies with good stock prospects. Alternatively, existing shareholders can sell their stocks at an elevated price and make a profit.

Stock price

When a company is listed as ‘buy,’ stock price targets commonly increase, and for the Florida-based firm, this has also been the case. The pet company’s stock price target, the amount analysts deem the stock to be fairly valued based on projected and historical earnings, was raised from $42 (€‎37) to $50 (€‎44). 

The company’s growth is attributed to its steadily inclining customer base and an upward trend in higher-spending consumers. 

Chewy’s recent announcement of its international expansion to Canada is also listed as one of the drivers.

The online pet retailer posted net sales of $10.1 billion (€9B) in 2022, up 13.6%. 

Expanding margins 

Due to the notable growth, analysts have also raised their revenue and adjusted earnings estimates. As investment experts, Goldman Sachs sees an opportunity for Chewy to expand its margins over the next 5 years, which can be done by scaling up its private-label and healthcare segments and improving supply chain transformation and automation.

Prior to this latest news, another major investment banking company, Morgan Stanley, dropped its ownership in Chewy from 18.6% in 2022 to 17.7% in 2023. 

Based on the latest stock increase, it will be interesting to see if the investment banking company and others decide to build their shares in Chewy.