Chewy (CHWY) fell more than 11% this morning after the online pet supply store delivered third-quarter earnings with a mixed bag of results. While revenue lagged, an earnings beat was a positive surprise.

The company reported revenue of $2.74 billion, a slight improvement year over year compared to the $2.53 billion reported in 2022. However, this figure did fall just short of the consensus estimate by 0.56%. That being said, this is the first revenue miss in the last four quarters.

The good news though is that the company delivered a surprise earnings beat. They reported 15 cents a share compared to the consensus of 9 cents per share. This time last year, Chewy reported earnings per share of just 1 cent. It’s worth noting that Chewy did report a net loss of $35.8 million for the quarter.

This is now the fourth quarter in a row that the company has delivered a surprise earnings beat. In the second quarter of this year, Chewy was forecasted to deliver earnings of 11 cents per share and reported 15 cents per share.

The stock’s drop is likely being driven by the update in guidance, though. The company is looking for full-year net sales to fall somewhere between $11.08 billion to $11.1 billion. Analysts were expecting at least $11.24 billion.

Chewy says it’s facing many of the same economic pressures as other retailers, both within its own industry and the economy as a whole. 

It’s also important to note that the company appointed David Reeder as its new CFO, hoping to breathe fresh life into the company and fuel growth. That being said, some analysts are suggesting that Chewy may be nearing its full potential – and this spells concern for investors.

The stock has plummeted 54% in the past year, and this news certainly won’t help turn things around. So, is it time to cut losses on CHWY and move on? 

Not so fast. We’ve uncovered three things in the VectorVest stock forecasting software that you need to see before you do anything else with this stock.

CHWY Has Poor Upside Potential and Safety With Fair Timing

VectorVest saves you time and stress while empowering you to win more trades. You’re given all the insights you need to make clear, calculated decisions in 3 simple ratings. These are relative value (RV), relative safety (RS), and relative timing (RT).

Each rating sits on its own scale of 0.00-2.00 with 1.00 being the average, allowing for quick and easy interpretation. You’re even offered a buy, sell, or hold recommendation for any given stock at any given time based on the overall VST rating. As for CHWY, here’s what we’re seeing:

  • Poor Upside Potential: The RV rating assesses a company’s long-term price appreciation potential compared to AAA corporate bond rates and risk. This offers far superior insights than a simple comparison of price to value alone. CHWY has a poor RV rating of 0.52 right now. Even after losing half its value in the last year, the stock is overvalued - with a current value of just $2.28.
  • Poor Safety: The RS rating looks at a stock’s risk profile. It considers a myriad of factors, including financial consistency & predictability, debt-to-equity ratio, business longevity, sales volume, price volatility, and more. As for CHWY, the RS rating of 0.66 is poor.
  • Fair Timing: The RT rating of 0.91 is fair for CHWY, albeit it is below the average. This rating is based on the direction, dynamics, and magnitude of the stock’s price movement day over day, week over week, quarter over quarter, and year over year.

The overall VST rating of 0.73 is poor for CHWY, but it’s not quite enough to result in a SELL warning. The stock is still rated a HOLD for the time being, but things could change quickly if the stock continues to fall. 

So, stay up to date with the help of VectorVest. Get a free stock analysis today to learn more about what VectorVest can do for you to simplify your trading strategy and help you win more trades with less work!

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VectorVest advocates buying safe, undervalued stocks, rising in price. CHWY delivered an earnings beat and a revenue miss, but it was likely the weak guidance for the remainder of the year that sent shares tanking in today’s trading session. The stock has poor upside potential and safety with fair timing as of now.

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