Here’s what could drive Chewy stock price up 75% over the next 12 months

A more than 10% pullback in Chewy Inc (NYSE: CHWY) this month is an opportunity to load up on a quality name at a discount, says Nathan Feather – a senior Morgan Stanley analyst.

Feather added CHWY shares to his list of “top picks” this morning, saying his bull case could see them hit $75 over the next 12 months – indicating potential upside of nearly 75% from here.

That said, Chewy stock remains rather unattractive for income investors as it doesn’t currently pay a dividend.

What could help Chewy stock hit $75 within a year?

Chewy has recently penetrated the clinical veterinarian market, which Feather believes could prove a meaningful tailwind for the online retailer.

Exposure to this multi-billion-dollar market adds “another growth vector to an already compelling customer growth and margin story,” he told clients in a research note today.

More importantly, the analyst said there’s a “high likelihood” that CHWY will succeed in its latest venture (clinics). Note that veterinarian clinics currently represent nearly a quarter of the overall pet market.

Morgan Stanley’s uber bullish call on Chewy shares is particularly significant since the retail stock is already up some 40% versus its year-to-date low in early April.  

CHWY shares to benefit from firm’s success in vet clinics

Chewy plans on expanding its “Vet Care” segment further this year, after launching its very first veterinary clinic in South Florida in 2024.  

These clinics offer services like routine checkups, urgent care, and surgery, aiming to create a more integrated and tech-enabled veterinary experience.

According to the Morgan Stanley expert, every 100 clinics that CHWY launches will add as much as $800 million to its enterprise value. Plus, the company’s clinics stand to earn up to 5 times return on investment as well, he noted.

Feather recommends sticking with Chewy stock in 2025 primarily because the firm’s health-tech capabilities and its customer affinity could see it dominate the vet clinic market over time.

Chewy continues to report better-than-expected financials

Morgan Stanley expects Chewy to tap into mergers & acquisitions (M&A) to grow its clinics unit.

Financial strength was among the other reasons the investment firm cited for its constructive view on CHWY shares on Wednesday.

In its fiscal Q1, the online retailer of pet food and pet-related products earned 35 cents (adjusted) on a per-share basis and $3.12 billion in revenue. Analysts, in comparison, had called for 17 cents only on $3.08 billion in revenue.

At the time, Chewy maintained its full-year sales guidance at $12.3 billion to $12.45 billion.

While not nearly as bullish as Nathan Feather, other Wall Street analysts are also keeping positive on Chewy stock this year, as evidenced in their consensus “overweight” rating.

The mean target on CHWY shares currently stands at nearly $46, indicating potential upside of another 9.0% from here.

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