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Chewy has identified roughly $50 million in potential savings by using artificial intelligence to handle routine tasks and improve efficiency. While many companies talk about AI in vague terms, this specific target shows a clear plan to use the technology to protect its profits as it grows.
For a retailer that ships millions of physical packages, finding ways to lower the cost of doing business is vital. If Chewy can hit this goal, it will help offset the rising costs of labor and shipping, making the business more profitable without needing to find new customers.
Goldman Sachs lowered its price target from $34 to $30 while keeping its buy rating on the stock. This move aligns with the average analyst target of $30, which still sits well above the current price of about $21. While the firm trimmed its target, keeping the buy rating suggests it still sees the company's shift into higher-margin areas like pet health as a winning path. This was a routine adjustment after the recent earnings report rather than a change in how the firm views the business.
Source: Goldman Sachs
Evercore ISI Group lowered its rating on Chewy to in-line, which means the firm expects the stock to perform about the same as the rest of the market. This move follows a week where other analysts also grew more cautious after the company's latest financial results.
While Chewy has shown it can grow its profit margins, some analysts are concerned about the slow growth in its total number of active customers. For a long-term owner, the focus remains on whether the company can successfully sell more high-margin services like pet insurance and pharmacy items to its existing loyal base to make up for that slower customer growth.
JPMorgan Chase lowered its rating on the pet retailer from overweight to neutral on Friday. This is a major move from a widely followed firm, signaling a shift in how analysts view the company's path to growth.
While the company is still growing its sales, the downgrade suggests less confidence that the stock will outperform the broader market in the near term. The average price target across all firms now sits at about $30, which is still well above the current price of roughly $20.
While the company reported higher sales and profits on Wednesday, its free cash flow, the actual cash left over after paying for operations and equipment, came in lower than expected. This mismatch is why the stock fell even though the main earnings numbers looked good.
For a company like this, cash flow is a vital measure of health because it shows how much money is available to reinvest in the business or buy back shares. The miss suggests that even as sales grow, the company is spending more than anticipated to keep its operations running or to build out its new automated warehouses.
Source: Proactive Investors
Management consistently sets conservative targets and beats them by small margins, showing they have a firm handle on the business even as the pet industry slows down.
| Expectation | |
|---|---|
| EPS | $0.38 |
| Revenue | $3.34B |