Key Takeaways

New ventures like Chewy Vet Care and ad platforms are set to drive higher profitability and expand into adjacent markets beyond initial expectations.
Enhanced loyalty programs and operational efficiencies are deepening customer value and positioning Chewy to capitalize on industry trends toward premium pet care.
Growth and profitability are threatened by rising acquisition costs, slowing pet ownership, stronger competition, regulatory risks, and shifts toward omnichannel or in-person pet services.

Catalysts

About Chewy

Engages in the e-commerce business in the United States.What are the underlying business or industry changes driving this perspective?

Analyst consensus views Chewy Vet Care as a compelling new revenue stream, but the pace and magnitude may be understated-management commentary and evidence of strong unit economics, higher-than-expected new customer acquisition, and ecosystem integration suggests CVC could become a scalable, high-margin engine that unlocks not just the existing $25 billion vet services market, but also adjacent markets such as telehealth and pet insurance, ultimately fueling both top-line acceleration and materially expanding EBITDA margins.
While analyst consensus expects sponsored ads to reach up to 3 percent of net sales, rapid supplier adoption and the successful migration to a first-party platform with advanced analytics and off-site/social integration indicate ad revenues could scale well beyond current projections and serve as a sustained gross margin tailwind, potentially driving structurally higher profitability than the market assigns.
Chewy's growing loyalty programs, including Autoship and Chewy+, are deepening customer relationships and fueling recurring, high-quality revenue growth; as these programs proliferate and cross-sell rates increase, Chewy can substantially grow customer lifetime value and net sales per active customer, leading to durable earnings expansion.
Chewy is positioned to benefit disproportionately from increased premiumization and humanization of pet care, with private label expansion, healthcare, and specialty product offerings capturing rising spend per pet and providing runway for AOV and margin growth as demographic shifts and cultural trends accelerate.
Logistics and fulfillment network scale, coupled with automation and data-driven operational discipline, is driving significant cost leverage and SG&A efficiency, supporting a path to double-digit adjusted EBITDA margins and enabling higher free cash flow conversion even as the company invests for market share gains.

Chewy Earnings and Revenue Growth

Chewy Future Earnings and Revenue Growth

Assumptions

How have these above catalysts been quantified?

This narrative explores a more optimistic perspective on Chewy compared to the consensus, based on a Fair Value that aligns with the bullish cohort of analysts.
The bullish analysts are assuming Chewy's revenue will grow by 11.6% annually over the next 3 years.
The bullish analysts are assuming Chewy's profit margins will remain the same at 3.2% over the next 3 years.
The bullish analysts expect earnings to reach $540.5 million (and earnings per share of $1.36) by about September 2028, up from $388.2 million today. The analysts are largely in agreement about this estimate.
In order for the above numbers to justify the price target of the more bullish analyst cohort, the company would need to trade at a PE ratio of 49.1x on those 2028 earnings, up from 44.8x today. This future PE is greater than the current PE for the US Specialty Retail industry at 18.7x.
Analysts expect the number of shares outstanding to decline by 0.76% per year for the next 3 years.
To value all of this in today's terms, we will use a discount rate of 8.17%, as per the Simply Wall St company report.

Chewy Future Earnings Per Share Growth

Risks

What could happen that would invalidate this narrative?

The company's long-term growth potential may be limited by slowing population growth and the possibility of declining pet ownership rates among younger generations, which could result in stagnant or declining user growth and pressure on revenue expansion.
Persistent high customer acquisition costs, especially if marketing expenses and incentives continue to outpace customer lifetime value, could constrain margin expansion and lead to ongoing net losses, limiting improvement in earnings and profitability.
Chewy's largely online-only model may be disadvantaged if consumer preferences shift toward omnichannel experiences or in-person services such as in-store veterinary care, potentially reducing market share and long-term revenue growth.
The risk of intensified competition from major retailers like Amazon, Walmart, and Target-who are increasing their investments in pet e-commerce and logistics-could lead to compressed pricing power, margin pressure, and slower share gains, negatively affecting revenues and operating margins.
Regulatory changes targeting e-commerce-such as stricter data privacy requirements, new digital taxes, or shipping laws-could increase compliance expenses and operational complexity, ultimately eroding net margins and suppressing long-term earnings growth.

Valuation

How have all the factors above been brought together to estimate a fair value?

The assumed bullish price target for Chewy is $52.0, which is the highest price target estimate amongst analysts. This valuation is based on what can be assumed as the expectations of Chewy's future earnings growth, profit margins and other risk factors from analysts on the bullish end of the spectrum.
However, there is a degree of disagreement amongst analysts, with the most bullish reporting a price target of $52.0, and the most bearish reporting a price target of just $33.0.
In order for you to agree with the bullish analysts, you'd need to believe that by 2028, revenues will be $16.8 billion, earnings will come to $540.5 million, and it would be trading on a PE ratio of 49.1x, assuming you use a discount rate of 8.2%.
Given the current share price of $42.1, the bullish analyst price target of $52.0 is 19.0% higher.
We always encourage you to reach your own conclusions though. So sense check these analyst numbers against your own assumptions and expectations based on your understanding of the business and what you believe is probable.

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