On Thursday, MoffettNathanson adjusted its outlook on Chewy Inc . (NYSE:CHWY), a leading online retailer of pet products, by reducing the price target to $18 from the previous $21. The firm has decided to maintain a Neutral rating on the company's shares.
The revision reflects concerns about heightened competition within the pet industry, which seems to have impacted Chewy's recent performance. According to the firm, this competition is evident in Chewy's subdued customer acquisition numbers.
The valuation approach employed by MoffettNathanson remains consistent, utilizing a 50/50 mix of a discounted cash flow (DCF) model and a forward-looking Adjusted EBITDA multiple. This multiple is set at 25 times for the fiscal year 2024, which aligns with the valuation multiples of Chewy's industry peers.
The new price target of $18 is informed by this valuation methodology and the competitive challenges Chewy faces. Despite these challenges, the firm's stance on Chewy's stock remains unchanged at Neutral.
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