We recently compiled a list of the 10 Best Pet Stocks To Invest In According to Analysts. In this article, we are going to take a look at where Chewy Inc. (NYSE:CHWY) stands against the other pet stocks.
Pet Industry at a Glance
The pet industry is a rapidly growing sector. It was valued at approximately $320 billion in 2023 and is projected to reach nearly $500 billion by 2030, according to Bloomberg Intelligence’s Pet Economy Report. This growth is driven by a rising global pet population and an increasing trend of pet humanization, where owners treat pets as family members and are willing to spend more on their care, including premium food and health services.
The report notes that the US is positioned to remain the largest pet market. In the United States, the market is expected to approach $200 billion by 2030, with significant spending on veterinary care and pet healthcare products.
Ann-Hunter Van Kirk, Bloomberg Intelligence Senior Biopharmaceutical Analyst and co-author of the report, noted that improved pet nutrition is contributing to longer lifespans for pets, which in turn drives up spending on healthcare for aging animals. Analysts expect this trend of increased spending on pet health to continue over the next decade.
Diana Rosero-Pena, Bloomberg Intelligence Consumer Staples Analyst and co-author of the report, highlighted a notable rise in consumer spending on pet products, predicting that the pet food market could grow by more than 50% by 2030.
Shopping Trends Among Pet Owners
In April 2024, Acosta Group released the results of a new study highlighting important insights into pet parents’ shopping habits. With two in three US households owning at least one dog or cat, spending on pet food, treats, and healthcare has become a significant part of household budgets. The study found that 96% of pet parents consider their pets family members, and 86% are willing to adjust their budgets to accommodate their pets’ needs. This presents a valuable opportunity for retailers and brands to target this large audience.
The study also highlighted key preferences among pet parents regarding food choices. 42% prioritize high-protein content for their pets, followed closely by 40% who focus on joint care and 38% who seek probiotics for gut health. Additionally, 36% of pet parents are interested in fresh, minimally processed foods. Brand loyalty plays a significant role in purchasing decisions, with 57% of dog owners and 59% of cat owners sticking to brands they have previously purchased. However, impulse buying is common, especially among millennials, with 58% influenced by in-store promotions. Most pet owners are turning to mass retailers, pet specialty stores, and online retailers for their pet care purchases, indicating a shift in how pet care products are accessed.
Overall, the pet industry remains a vital part of the global economy, driven by strong consumer attachment to pets and an ongoing commitment to their well-being.
Our Methodology
To compile our list of the 10 best pet stocks to invest in according to analysts, we reviewed our own rankings and consulted various online resources. From an initial pool of more than 20 pet stocks, we focused on the top pet stocks that analysts believe have the most potential for growth. We ranked the 10 best pet stocks to buy based on their average price target upside potential according to analysts as of October 29, 2024.
Additionally, we mentioned the hedge fund sentiment surrounding each stock, which was taken from Insider Monkey’s database of 912 elite hedge funds as of Q2 of 2024.
Why do we care about what hedge funds do? The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 275% since May 2014, beating its benchmark by 150 percentage points (see more details here).
Photo by James Lacy on Unsplash
Chewy Inc. (NYSE:CHWY)
Average Price Target Upside Potential According to Analysts: 23.64%
Number of Hedge Fund Holders: 33
Chewy Inc. (NYSE:CHWY) is an American online pet supply retailer that offers a wide range of products, including food, toys, and medicine. The company partners with around 3,500 trusted brands and also has its own private-label products. With about 115,000 products and services available through its websites and mobile apps, Chewy Inc. (NYSE:CHWY) makes it easy for pet owners to find everything they need. The company also offers a subscription service through its Autoship program that allows customers to set up regular deliveries of pet supplies.
In the second quarter of 2024, Chewy Inc. (NYSE:CHWY) reported net sales of $2.86 billion, which is a 2.6% increase from the same quarter last year. Basic earnings per share rose significantly to $0.70, an increase of $0.65 year-over-year. The Autoship program continues to be a strong performer. Autoship customer sales increased by around 6% and accounted for 78% of total sales. This reflects the program’s popularity and the strength of Chewy’s (NYSE:CHWY) essential product categories, such as consumables and pet health products.
The company is also seeing positive trends in customer engagement. Chewy Inc. (NYSE:CHWY) achieved a record net sales per active customer of $565 in Q2 2024. Additionally, the company has been redesigning its mobile app to make the overall user experience more convenient. In the second quarter of 2024, unique customers who placed orders through the company’s mobile app increased by about 13% year-over-year, with overall mobile app orders increasing approximately 15% year-over-year.
Furthermore, Chewy Inc. (NYSE:CHWY) has expanded its veterinary services by opening two new Vet Care clinics in Denver and South Florida. This expansion aligns with the company’s goal to enhance customer care and support pet health.
With strong financial performance and ongoing improvements in customer engagement, Chewy Inc. (NYSE:CHWY) presents a compelling investment opportunity in the pet industry. The company’s focus on convenience and quality positions it well for future growth.
Analysts have a positive outlook on CHWY. The 12-month median price target set by analysts indicates a potential increase of 23% from the stock’s current price.
As of the second quarter of 2024, Chewy Inc. (NYSE:CHWY) was held by 33 hedge funds, according to Insider Monkey’s database. Meridian Funds stated the following regarding Chewy Inc. (NYSE:CHWY) in its “Meridian Growth Fund” Q2 2024 investor letter:
“Chewy Inc. (NYSE:CHWY) is an online provider of pet food, supplies, and medications. The company’s stock soared during COVID while customers accelerated online purchases and added pets to their families. Following a post-COVID correction, we re-established a position during the quarter at what we believe to be an attractive price. With nearly 80% of revenues recurring—a rarity for an online business—we believe Chewy is well-positioned to activate and grow its customer base. In addition, we can see its pharmacy business starting to improve net sales and margins per active customer and have high confidence in its new CFO. Both, in our view, could add significant value. The stock gained during the period as higher net sales per active customer increased almost 10%.”
Overall, CHWY ranks 7th on our list of the best pet stocks to invest in according to analysts. While we acknowledge the potential of CHWY as an investment, our conviction lies in the belief that AI stocks hold greater promise for delivering higher returns, and doing so within a shorter time frame. If you are looking for an AI stock that is more promising than CHWY but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
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Disclosure: None. This article is originally published at Insider Monkey.