Ro Khanna is a Democratic congressman from California whose stock picks keep making headlines. His latest financial disclosures show steady buying in two names through June and July.
Uber Technologies, Inc. (NYSE:UBER) shows up more than any other stock in the filing. Khanna’s disclosures list several separate Uber purchases between June 15 and July 29, with no sales in that stretch. Uber is down about 18% over the past year.
Chewy Inc. (NYSE:CHWY) is the second name. The filing shows nine Chewy purchases between July 13 and July 30.
Chewy is down about 40% over the past year and 30% so far this year. Is this a potential opportunity to buy the stock on the dip? Let’s analyze.
Chewy, Inc. (NYSE:CHWY) sells pet food, treats, supplies and medications online. The business runs on Autoship, a subscription program where customers set up recurring deliveries.
The Bull Case
Chewy net sales rose 7.7% year over year in Q1, while gross margin expanded 50 basis points to 30.1%, and adjusted EBITDA margin hit 7.5%, up 130 basis points year over year.
The company added nearly 200,000 net new customers, ending the quarter with 21.5 million active customers. That growth came despite a consumer environment management called challenging.
Bulls say margins can keep improving. Sponsored advertising is the biggest lever. Brands pay Chewy for placement on a platform where customers are already shopping, and the cost to serve is far lower than shipping pet food. Management believes advertising can eventually reach 3% of sales with incremental margins as high as 70%. Fulfillment automation and cost discipline add to that.
Catalysts to Watch
Vet Care is the main growth story management is pushing. Chewy went from 18 clinics to 47 after acquiring Modern Animal in April, plans to open another 10 to 12, and expects to exit fiscal 2026 with roughly 60 clinics. About 40% of Vet Care customers are new to Chewy, clinic-acquired customers reach roughly $900 in first year spending, and existing customers increase their wallet share after visiting a clinic.
Photo by AlphaTradeZone
Valuation
On forward non-GAAP earnings, Chewy trades at 15.21 times against a sector median of 16.02, so it is 5% cheaper than its peer group. Trailing non-GAAP sits at 17.23 times versus 15.24. On enterprise value to sales, the stock looks cheap at 0.74 times trailing and 0.71 forward against sector medians of 1.27 and 1.26, discounts of 42% and 44%.
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