Chewy (CHWY): Assessing Valuation as Analyst Optimism Grows and Earnings Outlook Improves

Chewy (CHWY) has come under the spotlight following a series of analyst updates and investment firm commentary. The company is drawing fresh attention as earnings estimates have moved higher and investor sentiment shows signs of improvement.

See our latest analysis for Chewy.

Chewy’s momentum has picked up following renewed confidence from analysts and investors, with attention turning to its growth efforts and improving earnings outlook. Even with solid revenue gains this year, the share price has slipped 11.7% over the past month and 17.2% over the last 90 days. However, when you zoom out, Chewy’s total shareholder return is up 5.7% for the past year. This hints at underlying optimism about its long-term strategy despite some short-term volatility.

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With shares trading well below analyst targets and significant earnings growth projected, is the market overlooking Chewy’s potential? Or is all that future growth already priced in?

Most Popular Narrative: 26.2% Undervalued

Chewy’s last close at $33.53 is significantly below the narrative's fair value estimate of $45.45. This wide gap highlights high expectations for future growth despite recent share price weakness.

Chewy's strategic expansions, such as opening new Chewy Vet Care Clinics, are expected to further penetrate the $25 billion vet services market. This could increase revenue and active customer engagement in 2025 and beyond. The migration to a 1P ad platform allows for enhanced advertising capabilities, including off-site ads and new content formats like video, which could grow the sponsored ads business up to 3% of total enterprise net sales and positively impact gross margins.

Read the complete narrative.

What fuels such a bold outlook? There is a big bet on new verticals and major gains in both recurring and diversified revenue, with margin expansion riding on fresh digital strategies. Want to see what game-changing financial assumptions drive this hot fair value? The real story is just a click away.

Result: Fair Value of $45.45 (UNDERVALUED)

Have a read of the narrative in full and understand what's behind the forecasts.

However, sustained reliance on Autoship subscriptions and slow customer growth could challenge Chewy’s revenue stability and raise questions about the bullish long-term outlook.

Find out about the key risks to this Chewy narrative.

Another View: Multiples Suggest Caution

While the narrative points to Chewy being undervalued, the traditional price-to-earnings ratio sends a different message. Chewy trades at 92 times earnings, which is much higher than the industry average of 17.3 and well above the fair ratio of 26.7. This significant disparity may signal valuation risk if sentiment shifts or results disappoint.

See what the numbers say about this price — find out in our valuation breakdown.

Build Your Own Chewy Narrative

Want to dive deeper or draw your own conclusions from the numbers? Craft a personalized Chewy story in just a few minutes. Do it your way

A great starting point for your Chewy research is our analysis highlighting 3 key rewards and 1 important warning sign that could impact your investment decision.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.

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