Wall Street Screams “Rabies” Over Chewy Shares Despite Earnings Beat…

While everyone has been busy catching eye sores from reading about U.S.-China negotiations, or whatever quantum vaporware is being thrown around this week, Chewy just reminded everyone that being the “Amazon for pets” means you get smacked for sneezing in the wrong direction. Shares got absolutely neutered at the bell (read: -12.04%) after a Q1 earnings report that was… totally fine, if you’re capable of basic math and not operating on Zyn and analyst delusions. 

(Source: Giphy) 

For starters, here are the receipts: Chewy’s GAAP net income landed at $62.4 million, or $0.15 per share, missing the $68.9 million and $0.16 per share some analysts over at Visible Alpha penciled in. Which, if you can’t tell, is a bean counting error dressed up as an overreaction by Wall Street.

However, the absurd part is that adjusted EPS hit $0.35 on $3.12 billion in sales. That’s a penny above what analysts expected ($0.34) and $40 million more revenue than Wall Street’s best guess. Chewy even blew past the high end of their own guidance. I’ll say that again for the peanut gallery: They RAISED the bar, then tripped over a shoelace nobody could see, and Wall Street called Animal Control. 

(source: IBD) 

Meaning, the “bad news” is mostly just that Q1 wasn’t enough of a miracle to justify a stock that was already up 37% this year and a brain-melting 102% in the last 12 months. Everyone’s looking for the next Roaring Kitty moment, so anything short of a moon landing gets punished. Meanwhile, Chewy’s active customer count jumped 3.8% to 20.8 million… their second quarter in a row adding users after a pandemic-era hangover. Autoship sales (the recurring revenue cash cow) spiked 15%, now making up 82% of all revenue. Bigly. 

As for management’s response? Chewys has that dawwwg in them. They affirmed full-year guidance… 6% to 7% sales growth, $12.3-12.45 billion in revenue, and Q2 targets the Street already thinks are sandbagged. So clearly, Chewy isn’t playing the “raise and raise again” hype game. They’re too busy swimming in free cash flow and letting everyone else panic. Now you’d think that’d count for something right? But then again, we aren’t overpaid portfolio managers managing quarterly bonuses, now are we? 

(Source: Giphy) 

On the other hand, Chewys did see a shakeup in leadership as CFO, David Reeder, is bolting for a CEO gig back in semiconductors… presumably because selling GPUs is a hell of a lot easier than convincing Wall Street that cat food subscriptions are a growth engine. Chewy says he’s “assisting with an orderly transition”... which just means he’s set to “Do Not Disturb” on Slack. 

Bottom line: Chewy beat on adjusted earnings and revenue, grew customers at the fastest clip since the pandemic, autoshipped its way into recurring revenue Valhalla, and stuck to its guidance with a confidence not seen since Michael Jordan’s flu game. And yet, the market's response was full-send on the sell button. 

(Source: Giphy)

Now obviously, Chewy’s is Gamestop’s less unhinged cousin, so you can bet your tail there will be some kind of “BTFD” energy going on. But hey, at least the fundamentals are solid. For now, keep your eyes on Chewy and place your bets accordingly. Until next time, friends… 

At the time of publishing, Stocks.News holds positions in Amazon as mentioned in the article.