Chewy Retail Watchers Sniff Buying Opportunity After 16% Plunge Post Earnings - Analyst Calls Selloff Overblown

JPMorgan on Wednesday maintained its 'Overweight' rating on Chewy stock, calling the over 16% drop following the company's quarterly results an overreaction, according to the summary of the investor note on The Fly.

Chewy reported second-quarter revenue above expectations and adjusted earnings per share (EPS) in line with targets. The company boosted its full-year sales forecast to a $12.5 billion to $12.6 billion range, up from $12.3 billion to $12.45 billion.

However, a 79% fall in quarterly net profit and less-than-expected investment into the business raised concerns, causing the shares to fall.

JP Morgan, which trimmed its price target on the company's shares by $2 to $45, noted that investors are likely worried about margin compression in the second half of the year.

The slide also follows recent momentum in the stock. Before Wednesday's session, CHWY shares had gained nearly 23% since a recent low in August, and 27% year-to-date.

Currently, 18 of the 28 analysts covering the stock rate it 'buy' or higher, and nine rate it 'hold,' according to Koyfin data. Their average price target is $45.6, implying a 30% upside from the last close.

Stocktwits users noted the drop to be a buying opportunity, with retail sentiment climbing higher in the 'extremely bullish' zone.

Analysts have previously raised concerns about the company's high valuation (Chewy stock hit a two-and-a-half-year high in June). 

Still, its financials have improved in recent quarters, driven by wider adoption of its Autoship subscription program, which lets customers schedule deliveries and gain priority access to popular products and essentials.

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