Chewy (CHWY): Valuation Check as Profitability Concerns and Margin Misses Drive Pre‑Earnings Volatility

Chewy (CHWY) is back in the spotlight after a fresh round of analyst reports zeroed in on its profitability, with repeated gross margin misses putting extra pressure on the stock ahead of earnings.

See our latest analysis for Chewy.

The latest analyst chatter and profitability worries come after a choppy stretch for the stock, with a 30 day share price return of 3.13% but a 90 day share price return of negative 17.52 percent. This has left longer term total shareholder returns still in negative territory and signals that sentiment has cooled rather than turned decisively bullish.

If Chewy’s swings have you rethinking concentration risk, this could be a good moment to scan for resilience and growth potential in fast growing stocks with high insider ownership.

With analysts divided and the shares trading at a sizable discount to consensus targets despite improving earnings, the key question now is whether Chewy is quietly undervalued or whether the market is already pricing in its future growth.

Most Popular Narrative: 24.5% Undervalued

Chewy’s most followed narrative sees fair value meaningfully above the last close of $33.95, framing today’s price as a potential entry point ahead of earnings.

The company's increased focus on innovation, such as the Chewy+ membership and mobile app improvements, is driving new customer acquisition and higher conversion rates, enhancing both revenue growth and net sales per active customer (NSPAC).

Read the complete narrative.

Curious how a subscription tweak, modest margin shifts, and aggressive earnings compounding can justify this gap between price and fair value? The narrative lays out a detailed growth runway, ambitious profitability targets, and a rich future earnings multiple that might surprise you. Dive in to see which specific assumptions have to hold for this valuation story to work.

Result: Fair Value of $44.95 (UNDERVALUED)

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

However, sustained reliance on Autoship, along with slower than hoped active customer growth, could easily derail those upbeat margin and fair value assumptions.

Find out about the key risks to this Chewy narrative.

Another View: Expensive on Earnings

While our narrative fair value points to upside, the earnings multiple paints a tougher picture. Chewy trades at about 93 times earnings, versus roughly 18 times for the US Specialty Retail industry, 24 times for peers, and a fair ratio of 28.5 times. This suggests meaningful valuation risk if sentiment cools.

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

Build Your Own Chewy Narrative

If you see the story differently or want to dig into the numbers yourself, you can build a custom narrative in just minutes using 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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