Chewy stock roared to a record high Thursday as two Wall Street analysts deemed the online provider of pet food and products well positioned to gain market share in 2021 and increase net sales per customer.
Needham analyst Rick Patel named Chewy (CHWY) his top pick for 2021 and raised his price target to 110 from 90, with a buy rating.
“Chewy has built a durable and scalable model that should benefit from secular trends towards digital, wallet share gains, and total addressable market expansion,” Patel wrote in a note to clients.
Moreover, he sees the online penetration for the pet category as low compared with other product categories. Online penetration for the pet category is estimated at 27% and is poised to reach 34% market in 2021.
Chewy Stock Rides The Elevator
Chewy stock climbed 6.4%, closing at 100.18 on the stock market today, hitting a record high. It’s hit new highs for three straight days and is up 20% this week. In addition, its relative strength line is at a record high, a positive indicator.
While consumables are the lion’s share of Chewy revenue — comprising about 70% of 2020 sales — the company is making inroads with new initiatives such as health care services for pets. In late October, Chewy announced plans to expand a telehealth service that provides continuous veterinarian care. This includes an expansion into pharmacy, gift cards and personalized products.
RBC Capital Markets analyst Mark Mahaney on Wednesday raised his price target on Chewy stock to 113, from 85, with a rating of outperform.
Executives at Chewy point to several engines driving revenue growth this year, Mahaney said in a note to clients. This includes an expanding base of users, greater retention of its existing base, and greater overall basket size at the checkout counter.
The company held its initial public offering in June 2019, pricing shares at 22 and raising $1.02 billion. Chewy was a spinoff of PetSmart (PETM). Chewy says it’s the largest U.S. online retailer of pet food and supplies.
Third-Quarter Revenue Jumped 45%
The company reported third-quarter results last week that delivered a 45% jump in revenue to $1.78 billion and a smaller-than-expected loss, both topping Wall Street estimates.
Chewy was named an IBD Stock Of The Day in late October. It’s among the top-rated stocks in IBD’s Retail-Internet industry group. The top stock in that group is Etsy (ETSY). Another one is Amazon (AMZN).
Chewy stock is up 240% this year.
Please follow Brian Deagon on Twitter at @IBD_BDeagon for more on tech stocks, analysis and financial markets.
YOU MAY ALSO LIKE: