The Pet Retailer Fighting Back After A ‘Ruff’ Patch

30‑Second Take

Pet parents have helped to push Chewy back into Wall Street’s good graces over the last 12 months. It has outperformed many of its competitors this year, gaining 25% and remaining largely untouched by the trade tariff volatility.

Even with that progress, some analysts still consider it to be around 20% undervalued, making it a bargain pick as earnings and revenue growth forecasts are both comfortably ensconced in double-digit territory.

Trade Setup

Time frame:  Swing to medium term
Edge type: Momentum breakout + catalyst anticipation

Snapshot Table

Chart

Chewy’s stock has shown strong momentum over the past five trading days, steadily climbing from mid-$38 levels to over $43. The gains were gradual at first, with a couple of small fluctuations, but the stock surged to close the period with a notable upswing. This performance suggests growing investor interest and confidence in the company’s direction.

The recent trend may reflect optimism around Chewy’s positioning in the online pet retail market and potential improvements in its business outlook. While no single catalyst dominated the week, the consistent upward movement points to a broader sense of positive sentiment around the stock. Investors appear to be responding to improving market conditions and possible long-term growth expectations.

Bull Case 

Core Thesis: Chewy is the only pet segment’s market leader, and its strength lies in its ability to cultivate long-lasting relationships with its clients. It has made smart use of a subscription model, with strong auto-ship sales figures (around 80% of all retail sales) suggesting deep customer loyalty. 

It recently added veterinary clinics to its service offering. This is a strategic move that not only helps the brand to become more entrenched in the homes of pet parents nationwide but also creates a new revenue stream and broadens its user base. 

Catalysts: The upcoming Q1 earnings report is due out in a few weeks. With annual sales on target to hit $12.4 billion, Chewy may beat Wall Street expectations once again after surprising to the upside with its January figures. 

Valuation Upside: Analysts expect Chewy to grow its sales and active customer base through 2025. It is already within touching distance of the topside valuation of $47.00, and has easily surpassed the average price target of $39.70.

Technical tailwind: The recent price trajectory is expected to continue, with prices set to increase. Technical indicators are flashing a buy signal as the stock looks poised to make further gains.

Bear Case 

Key Risk: Chewy doesn’t have any brick-and-mortar stores, which leaves it vulnerable to the immediacy that brands like Walmart can offer. Its recent expansion into vet services could also pull focus away from its eCommerce store, with any failure in that space likely to create problems for its core retail business.

Macro/sector headwinds: The eCommerce sector overall faces some tailwinds from economic uncertainty and tighter consumer spending. While Chewy says that the pet sector is ‘recession resilient’, a downturn could make it more challenging to grow the active user base. 

Competitive Threat: There are numerous brands jockeying for positions in the highly lucrative pet space, including heavyweights like Amazon. This means pet parents have plenty of alternative options, putting loyalty to the test if competitors are more price attractive, offer faster shipping or focus on product innovation. 

Crowded-trade concern: Chewy stock has traditionally been characterized by a high level of volatility. It is currently trading at the top end of analyst expectations and so could be subject to a sharp correction if its next earnings report misses the mark.

Quick Checklist 

✅ Thesis still valid after today’s close
✅ Volume confirms move above key levels
✅ Catalyst date double-checked (strategic partnership)

🔍 Deep‑Dive Links

• Fiscal Fourth Quarter and Full Year 2024 Financial Results

• Analyst Ratings and Price Targets

• Short Interest Data

• Company Profile and Investor Relations

That’s all for today’s Everyday Alpha! We’ll have a new pick for you every morning before the market opens, so stay tuned!

Best Regards,
—Noah Zelvis
Everyday Alpha