On Friday, March 21, 2025, JMP reiterated a "Market outperform" rating on Chewy Inc. with a price target of $37.00. This affirmation suggests confidence in the company's resilience amid industry challenges, particularly following its third-quarter earnings report, where Chewy's stock returned -4%, better than the S&P 500's -6% and the Russell 3000's -7%.
Despite obstacles in the broader market, analysts are optimistic about Chewy's sustained industry trends and the acceleration of growth in its upstream channel in the fourth quarter. With an impressive $11.4 billion in revenue and a solid 29.2% gross margin, Chewy demonstrates strong fundamentals that position it favorably in the market. However, analysts caution that ongoing consumer spending pressures and low consumer confidence might hinder the growth of non-essential items on the Chewy platform.
As analysts look ahead to the company’s upcoming earnings release on March 26, 2025, they express that current expectations for increased active buyers, coupled with an approximate 13% year-over-year revenue growth, are reasonable assessments. Recent data from InvestingPro shows that three analysts have recently raised their earnings forecasts for Chewy ahead of their earnings announcement, with expectations that the company will maintain profitability this year.
Attention is fixed on several key metrics as investors readied themselves for the earnings report. Trends in active buyer numbers and net sales per active customer (NSPAC) will be critical in assessing Chewy's performance. Additionally, the development of Chewy Health, the broader revenue structure, and profit margins—especially regarding the growth and impact of sponsored advertisements—are areas of keen interest. Progress on Chewy's distribution center automation efforts is also pivotal for long-term operational efficiency.
Analysts are particularly intrigued by Chewy's recent initiatives, including the launch of veterinary clinics and an expansion into the Canadian market, which could open new revenue streams for the company. JMP's $37 target price for Chewy is based on a projected 19x enterprise value to its estimated 2026 EBITDA (earnings before interest, taxes, depreciation, and amortization).
In other news, TD Cowen has recently raised Chewy's price target to $45 while maintaining a buy rating. They anticipate 13% revenue growth year-over-year, projecting revenues to reach $3.2 billion, alongside significant EBITDA growth expected to rise to $1.18 billion. Piper Sandler has also reiterated an "Overweight" rating, setting a target price of $40 due to positive industry trends and the growth of Chewy's active customer base.
Mizuho Securities emphasizes the potential growth of Chewy's consumer-facing application, maintaining an "Outperform" rating and a target price of $42. This application could double the revenue penetration rate, indicating a promising avenue for future revenue generation. Guggenheim has increased its target price from $36 to $42, continuing its buy rating based on Chewy's favorable adjusted EBITDA growth potential.
Moreover, analysts expect net active customer growth to rebound, anticipating that the pricing dynamics within the pet food industry will normalize in 2025. Recent promotional endeavors, including a high-profile Super Bowl advertisement campaign, have significantly enhanced Chewy's visibility, resulting in a marked increase in its Instagram followers, which points to heightened marketing engagement.
While the current macroeconomic environment poses challenges, the strategic initiatives Chewy has adopted underscore the company's commitment to growth. The analysts’ outlook reflects broad confidence in Chewy's ongoing potential to capture market share and deliver shareholder value despite the surrounding economic headwinds.
The forthcoming earnings report will be crucial for understanding how well Chewy navigated these challenges and leveraged its resources for growth. As investors and analysts anticipate the results, Chewy's strategic execution and market positioning will likely remain in the spotlight.