Is this U.S.-China selloff a buy? A top Wall Street voice weighs in
Investing.com - CFRA has raised its price target on Chewy Inc. (NYSE:CHWY) to $54.00 from $53.00 while maintaining a Strong Buy rating. The new target represents significant upside from the current trading price of $35.99, with InvestingPro data showing analyst targets ranging from $33 to $52.
The research firm cited expectations for long-term margin improvement, projecting that Chewy will achieve over 10% adjusted EBITDA margins in the future. CFRA increased its earnings estimates for the pet products retailer to $1.26 per share for fiscal year 2026 and $1.67 for fiscal year 2027. The company currently maintains a healthy gross profit margin of 29.45%, according to InvestingPro data, which shows 12 additional key insights about the company’s financial health.
CFRA noted that Chewy’s recent fiscal second quarter results were solid, though the stock sold off following the announcement, with InvestingPro data showing a significant 14.7% decline over the past week. The analyst attributed the negative market reaction to the absence of a larger profit beat and management’s decision to maintain full-year adjusted EBITDA margin guidance of 5.4%-5.7% despite raising revenue outlook and achieving 9.17% year-over-year revenue growth.
The firm believes Chewy’s near-term margin upside is likely limited by ongoing investments in fulfillment centers, the Chewy+ subscription program, and potential consumer pricing adjustments. However, InvestingPro analysis indicates the company maintains strong financial health with a GOOD overall score, suggesting these investments are well-supported by the company’s financial position.
CFRA forecasts Chewy’s adjusted EBITDA margins will rise by 80 basis points in fiscal year 2026 to 5.6% and by 140 basis points in fiscal year 2027 to 7.0%, with sales mix improvements and automation initiatives in fulfillment centers serving as key drivers of this progression. For deeper insights into Chewy’s financial metrics and growth potential, access the comprehensive Pro Research Report available exclusively on InvestingPro.
In other recent news, Chewy Inc . reported second-quarter results that slightly exceeded consensus estimates for both revenue and EBITDA. The company demonstrated strong gross margins and an 8.6% year-over-year revenue growth, along with continued strength in net sales per active customer. Despite these positive outcomes, Chewy faced higher selling, general, and administrative expenses due to temporary cost items. Analyst firms have responded with mixed adjustments to their price targets. UBS lowered its price target to $43 while maintaining a Neutral rating, acknowledging Chewy’s market share gains in a competitive environment. TD Cowen adjusted its target to $48, maintaining a Buy rating, and noted the company’s strong performance in key metrics. RBC Capital also lowered its price target to $43, citing concerns about margin progression, but maintained an Outperform rating. Jefferies reduced its price target to $41, noting that solid results were overshadowed by upcoming investment plans, while Seaport Global Securities upgraded Chewy to Buy with a $47 price target, citing strong growth metrics.
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