12:22 PM EST, 12/05/2024 (MT Newswires) -- Chewy (CHWY) reported higher fiscal Q3 adjusted earnings and better-than-expected revenue as the pet supply retailer noted improvement in new customer acquisitions and reactivations, Wedbush said in a note to clients Thursday.

The pet supply retailer is likely to continue driving active customer growth, given its better-than-expected active customer KPI which increased 158,000 quarter on quarter, the "strongest level in over two years," Wedbush said.

"We look positively on the results that likely indicate a return to growth in net customer additions following two straight quarters of improvement, and continued outperformance on both gross margins and SG&A leverage," the note said.

The company's revised FY 2024 outlook "implies slightly lower [Q4] EBITDA margins than consensus forecasts" but Chewy's "decision to lean into marketing at a time when pet household formation is turning the corner and current cohort dynamics are trending favorably points to strong ROI from these investments over the coming quarters," Wedbush said.

The investment firm raised Chewy's target price to $39 from $35 and kept its outperform rating.

Shares of Chewy were down more than 5% in recent trading.

Price: 31.68, Change: -1.79, Percent Change: -5.35