What happened
Shares of Chewy (CHWY +1.07%) were running 5% higher Wednesday morning as of 10:47 a.m. ET after the online pet products company was named this year's top stock by an analyst at Needham & Co.
Analyst Anna Andreeva said she expects Chewy to pick up its pace of net sales per active customer (NSPAC) growth this year. Although that metric has been growing year over year by percentages in the mid-teens, she believes it has "ample room to head higher" in 2023.
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So what
As of the end of its fiscal third quarter on Oct. 30, Chewy had an active customer base of over 20.5 million people, up by 100,000 customers from a year prior, and its NSPAC jumped by 13.8% in the quarter to $477. While the customer gains may seem somewhat negligible, Chewy attracted massive new additions during the pandemic; now, it's lapping that period of high growth.
While it has seen a 34% increase in NSPAC since the first quarter of its fiscal 2020, Chewy will now be able to be viewed on a more natural growth trajectory. Even so, its more recent active customer additions are displaying the same spending patterns as those who have been with the company for years, and the customers who have been using the service the longest are spending around $1,000 a year with Chewy.
NYSE: CHWY
Key Data Points
Now what
Chewy's stock is up 15% over the past week, having strung together several consecutive days of increases. The stock has nearly doubled since last spring.
Management also believes its specialty and premium businesses have large runways of opportunity in front of them. Chewy is entering the pet healthcare market, which it views as a $40 billion market. And it's expanding into fresh and prepared foods for pets, which it sees as a premium category that could drive its sales much higher.
