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Investing.com - Piper Sandler has reiterated its Overweight rating and $48.00 price target on Chewy Inc. (NYSE:CHWY), highlighting the company’s ability to deliver growth while maintaining profitability. This target represents a 42% upside from the current price of $33.81, aligning with the broader analyst consensus of "Buy" according to InvestingPro data. Investors should note that Chewy is scheduled to report earnings on December 4.
The firm pointed to multiple growth drivers that remain in early stages, including the Chewy+ membership program, which recently increased its annual fee to $79 from $49. According to Piper Sandler, the gross margin impact of this program is now expected to be closer to neutral versus the initially anticipated dilutive effect, suggesting a compelling value proposition. This initiative could further boost Chewy’s gross profit margin, which currently stands at 29.45% based on latest twelve-month data.
Piper Sandler also noted Chewy’s expansion into veterinary care through its CVC initiative, which is on track to have 20 clinics by year-end and is outperforming on both sales and margins. The company’s recent entry into the fresh pet food category with its own Get Real brand was identified as another growth catalyst. These initiatives aim to diversify Chewy’s revenue streams, which reached $12.35 billion in the last twelve months with 9.17% year-over-year growth.
The research firm emphasized that Chewy is growing EBITDA and EPS at approximately 20%, while its valuation at 16x EV/EBITDA has contracted by 2-3x since the summer. This comes against an improving industry backdrop. InvestingPro data shows Chewy’s current EV/EBITDA at 57.49x and P/E ratio at 96.22x, suggesting the stock trades at premium multiples despite recent contractions. InvestingPro’s Fair Value assessment indicates the stock is slightly undervalued at current levels, with additional ProTips available for subscribers seeking deeper insights.
Piper Sandler also highlighted market share gains, noting that since the fourth quarter of 2024, e-commerce players including Chewy and Amazon have gained share from brick-and-mortar retailers, while Chewy has specifically taken share from Amazon in the Hardgoods category for the past two quarters. This market share expansion is supported by Chewy’s solid financial position, with InvestingPro analysis showing the company holds more cash than debt on its balance sheet. For comprehensive analysis of Chewy and 1,400+ other US equities, investors can access detailed Pro Research Reports through InvestingPro.
In other recent news, Chewy Inc . has announced several notable developments. The company revealed a significant increase in its Chewy+ membership fee, raising the annual cost from $49 to $79. This 61% hike is seen as a strategic move to address concerns about potential gross margin weaknesses in the latter half of fiscal year 2025, as noted by Mizuho, which maintains an Outperform rating on Chewy with a $50 price target. Additionally, Chewy is set to acquire SmartEquine, LLC from Covetrus, Inc. in an all-cash transaction. This acquisition is expected to enhance Chewy’s presence in the equine health products market, a sector known for its higher margins. SmartEquine is recognized for its subscription-based supplement programs and personalized nutrition plans. The financial details of the deal have not been disclosed, but the move is anticipated to strengthen Chewy’s position in the equine category. These developments highlight Chewy’s strategic efforts to expand its market reach and improve its financial performance.
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