Citi raises Chewy stock price target to $42, maintains buy rating

On Thursday, Citi analysts exhibited confidence in Chewy Inc . (NYSE:CHWY) by increasing the company’s price target from $40.00 to $42.00 while sustaining a Buy rating on the stock. This revision follows Chewy’s robust fourth-quarter earnings, which highlighted the company’s solid business fundamentals and provided an optimistic outlook for 2025. According to InvestingPro data, the stock has shown remarkable performance with a 112% return over the past year, though it currently trades at premium valuation multiples.

Chewy’s continued top-line sales growth has been fueled by its strong auto-ship business, which has helped the company gain additional market share. With revenue reaching $11.4 billion in the last twelve months and a healthy gross profit margin of 29.2%, the company demonstrates solid operational execution. A noteworthy turnaround in customer growth was also reported, with the customer count shifting to a positive low-single-digit increase. Citi analysts regard this customer growth as a crucial element for Chewy’s ongoing success and a sign that the company is realigning with its growth trajectory.

The company’s initial guidance for fiscal year 2025 on earnings before interest, taxes, depreciation, and amortization (EBITDA) was deemed conservative by Citi, especially considering management’s track record and unique growth factors. InvestingPro analysis reveals several positive indicators, including expected net income growth and multiple analyst earnings revisions upward for the upcoming period. These factors, along with Chewy-sponsored advertising, advancements in automation, and expanding sales in health and wellness products, are distinct from general pet demand and pricing trends and could contribute to greater financial performance if the demand in the pet sector strengthens in 2025. Discover 11 more exclusive InvestingPro Tips and comprehensive financial analysis in the Pro Research Report.

Citi’s valuation of Chewy stock is based on approximately 19 times the projected enterprise value to EBITDA for the fiscal year 2026. This valuation reflects the analysts’ anticipation of Chewy’s future earnings potential and the company’s ability to capitalize on its independent growth drivers.

Chewy, known for its online pet products and services, has been focusing on enhancing customer experience and expanding its product offerings. The company’s positive earnings report and the subsequent price target upgrade by Citi signal investor optimism in Chewy’s market position and its strategies for growth in the coming years.

In other recent news, Chewy Inc. reported its fourth-quarter earnings for 2024, surpassing analysts’ expectations with an earnings per share (EPS) of $0.28, compared to the forecasted $0.20. The company achieved revenue of $3.25 billion, exceeding the expected $3.2 billion, marking a 15% year-over-year increase. Chewy’s full-year net sales reached $11.86 billion, up 6% from the previous year. Analysts from Evercore ISI maintained an Outperform rating with a $47 price target, noting the company’s improved profitability trends, including year-over-year EBITDA and Gross Margin expansion.

Mizuho (NYSE:MFG) Securities also raised its price target for Chewy to $43, citing robust demand in the fourth quarter and strong margin performance. Jefferies reaffirmed its Buy rating on Chewy with a steady price target of $40, highlighting the company’s successful customer growth and margin improvements. Chewy added 354,000 active customers in the quarter, reaching 20.5 million, the largest quarterly net addition since the fourth fiscal quarter of 2021. The company’s first-quarter revenue guidance exceeded analysts’ expectations, although a modest deceleration in growth is anticipated for the first quarter of 2025.

Chewy plans to expand its Chewy Vet Care Clinics, aiming to open 8-10 new locations, reflecting its commitment to expanding services. The company’s strategic focus on customer acquisition and margin improvement is expected to drive continued success.

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