Shares of pet e-commerce company Chewy (NYSE: CHWY) dropped on Wednesday after the company’s financial results for the third quarter of 2024 missed expectations on the bottom line. As of 11:20 a.m. ET, Chewy stock was down about 8%.
Sales are up but profits fell short of expectations
In Q3, Chewy added about 200,000 net new customers, reaching 20.2 million total. And over the last 12 months, these customers have spent $567 on average compared with an average of $565 in the previous quarter. This customer and spending growth formed the basis of the company’s nearly 5% net sales growth, which was slightly ahead of expectations.
Chewy’s Q3 gross margin improved to 29.3%, which was good. Moreover, the company had net income of nearly $4 million compared with a $35 million loss in the prior-year period. While improved, investors had hoped for higher profits especially in light of its higher-than-expected sales. That’s why Chewy stock dropped today.
Chewy’s growth is heating up
I think investors might be missing the forest for the trees with Chewy today. Management just gave guidance for the fourth quarter of 2024, forecasting 13% year-over-year growth. Not only is that better than its 4% growth in the fourth quarter of 2023, this would be Chewy’s best growth in nearly two years.
There are many reasons to like Chewy stock but lackluster growth has held the stock back in recent years. But things could be turning around and I think investors are making a mistake to sell Chewy today. To the contrary, this looks like a buying opportunity to me.
Don’t miss this second chance at a potentially lucrative opportunity
Ever feel like you missed the boat in buying the most successful stocks? Then you’ll want to hear this.
On rare occasions, our expert team of analysts issues a “Double Down” stock recommendation for companies that they think are about to pop. If you’re worried you’ve already missed your chance to invest, now is the best time to buy before it’s too late. And the numbers speak for themselves:
- Nvidia: if you invested $1,000 when we doubled down in 2009, you’d have $363,671!*
- Apple: if you invested $1,000 when we doubled down in 2008, you’d have $45,954!*
- Netflix: if you invested $1,000 when we doubled down in 2004, you’d have $486,533!*
Right now, we’re issuing “Double Down” alerts for three incredible companies, and there may not be another chance like this anytime soon.
*Stock Advisor returns as of December 2, 2024
Jon Quast has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Chewy. The Motley Fool has a disclosure policy.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.