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On Thursday, CFRA analyst Arun Sundaram adjusted the price target for Chewy Inc . (NYSE:CHWY) to $42 from the previous $45 while sustaining a Strong Buy rating on the company’s shares. Currently trading at $33.65, the stock sits below the broader analyst consensus range of $31-$47. The revision reflects a modest reduction in valuation expectations, with Sundaram citing a blend of financial metrics to support the new target. Specifically, the target is based on 20 times the forecasted fiscal year 2026 EBITDA and 1.7 times the projected fiscal year 2026 enterprise value to sales ratio. According to InvestingPro, the stock currently trades at high valuation multiples, with an EV/EBITDA of 76.7x.
Chewy, the online retailer of pet products, has demonstrated impressive performance in the fourth quarter of fiscal year 2025 and is looking to carry this strong momentum into fiscal year 2026. With an InvestingPro Financial Health Score of "GOOD" and a return on assets of 13.6%, the company shows solid operational efficiency. Sundaram pointed out that the company has reached a turning point in net active customer growth, which had previously faced challenges in the post-pandemic market as growth rates normalized.
Further contributing to the company’s favorable outlook is the anticipated expansion of profit margins. This expansion is expected to be driven by several factors, including revenue from sponsored advertisements—which currently represents 1% of sales with aspirations to reach 3%—increased automation, and a strategic shift towards premium products and health/wellness categories. The company’s current gross profit margin stands at 29.2%, with InvestingPro analysis indicating potential for further improvement. Get access to 13 more exclusive ProTips and comprehensive analysis through the Pro Research Report.
Chewy’s veterinary care service, Chewy Vet Care, is also on an expansion path, with eight physical locations already established and plans to open an additional 8-10 locations within the year. Sundaram anticipates that these initiatives will bolster Chewy’s free cash flow and support the continuation of share buybacks throughout fiscal year 2026.
The analyst’s report also highlights Chewy’s solid financial footing, noting the absence of long-term debt and the company’s substantial liquidity, which is approximately $1.4 billion. Despite the reduction in the price target, the analyst’s outlook for Chewy remains optimistic, with expectations of sustained growth and financial strength in the coming fiscal year.
In other recent news, Chewy Inc. reported a strong fourth-quarter performance, with revenue and adjusted EBITDA margins surpassing expectations, as noted by several analyst firms. Needham observed that Chewy’s investments in supply chain and customer experience have begun to yield results, as evidenced by an increase in net customer additions. Goldman Sachs highlighted the company’s robust revenue performance and strategic initiatives, such as the Autoship program and sponsored ads, which contributed to growth and margin expansion. Citi analysts raised Chewy’s price target to $42, citing the company’s solid business fundamentals and optimistic outlook for 2025.
Mizuho (NYSE:MFG) Securities also increased its price target to $43, based on Chewy’s strong demand and margin performance in the fourth quarter. UBS adjusted its price target to $36, maintaining a Neutral rating while acknowledging Chewy’s return to a growth trajectory. Despite various price target adjustments, there is a consensus among analysts that Chewy’s strategic initiatives and market position support its growth potential. The company’s management has expressed confidence in capitalizing on growth opportunities, particularly through its digital and advertising strategies. These developments underscore Chewy’s ongoing efforts to enhance its market presence and operational profitability.
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