Chewy's Margin Trajectory: A Deeper Dive

Morgan Stanley's Positive Outlook

Morgan Stanley analysts have recently expressed a bullish view on Chewy's forward margin trajectory, describing it as "compelling and underestimated." This assessment is based on several factors, including Chewy's strong revenue growth, its increasing scale, and its focus on cost efficiency.

Key Drivers of Margin Expansion

Revenue growth: Chewy has consistently delivered strong revenue growth, with its top line increasing by over 20% in each of the past three years. This growth is driven by the company's expanding customer base and its increasing average order value.

Increasing scale: As Chewy's revenue grows, it is also benefiting from economies of scale. The company is able to spread its fixed costs over a larger volume of sales, which is helping to improve its margins.

Cost efficiency: Chewy has a strong focus on cost efficiency, and it is constantly looking for ways to reduce its expenses. The company has been able to achieve significant cost savings in areas such as fulfillment and customer service.

Implications for Investors

Morgan Stanley's positive outlook on Chewy's margin trajectory has implications for investors. The analysts believe that Chewy's stock is undervalued and that it has the potential to deliver strong returns in the future. Investors who are looking for a long-term growth stock should consider adding Chewy to their portfolios.

Conclusion

Morgan Stanley's analysis provides a compelling case for Chewy's future margin expansion. The company's strong revenue growth, increasing scale, and focus on cost efficiency are all factors that are likely to contribute to its margin improvement in the years to come. Investors who are looking for a long-term growth stock should consider adding Chewy to their portfolios.