11:10 AM EDT, 05/24/2024 (MT Newswires) -- Chewy (CHWY) is expected to see "modest" upside to its fiscal Q1 sales, with slight downside risk to margins, Wedbush Securities said in a note Friday.

The online pet food retailer is scheduled to report fiscal Q1 results Wednesday. Wedbush said it sees upside potential to its 2.2% sales growth outlook.

Pet food CPI grew 1.4% year-over-year on average during the three-month period, which Wedbush said is roughly in line with the company's expectation of no notable benefit from pricing on a like-for-like basis.

"An improving sales exit rate in 1Q and into 2Q could be a positive catalyst for CHWY shares even if it reiterates its FY guidance," Wedbush analysts, including Seth Basham, said. "Quite notably, Chewy.com engaged website traffic sharply inflected to finish the quarter with April traffic up 11% y/y compared to the 8% y/y decline in February and March."

Wedbush has an outperform rating on the Chewy stock, with a $25 price target.

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