Why Baird Is Bullish On Chewy

The COVID-19 pandemic accelerated the pet retail sector's transition to digital, which bodes well for Chewy Inc (NYSE: CHWY), according to Baird.

The Chewy Analyst: Justin Kleber initiated coverage of Chewy with an Outperform rating and a price target of $105.

The Chewy Thesis: The company addresses “an attractive, defensive growth sector, with favorable customer unit economics and a large sticky base of recurring revenue,” Kleber said in the initiation note.

“While concerns over the pace of net customer adds could linger, we believe embedded growth from existing cohort maturation is meaningful/ supportive of FY21 revenue upside,” he wrote.

“With a high-touch service model and proven customer acquisition strategy, we believe CHWY is well-positioned for continued outsized share gains as incremental industry volume shifts online,” the analyst stated.

He further added that Chewy has several early-stage initiatives that could expand its total addressable market.

CHWY Price Action: Shares of Chewy had risen by 3.85% to $88.64 at the time of publication Wednesday.