Gold prices just lower; monthly gains on track
On Thursday, RBC Capital Markets reiterated its confidence in Chewy Inc . (NYSE:CHWY), maintaining an Outperform rating and a $42.00 price target on the company’s stock. With the stock currently trading at $33.77 and showing a remarkable 112% return over the past year, RBC’s analysis forecasts a positive trajectory for Chewy, citing increased net customer additions and advancements in margin initiatives as key factors reinforcing the firm’s outlook on the online pet retailer. According to InvestingPro data, the company maintains a healthy financial position with an overall "GOOD" rating.
The firm raised its estimates for Chewy’s first-quarter net sales growth to 7.6%, up from the previous 5.2%, and adjusted EBITDA margin to approximately 6.6%, a slight increase from the earlier estimate of around 6.2%. This adjustment reflects RBC’s growing conviction in Chewy’s performance within a challenging macroeconomic environment. The company’s current gross profit margin stands at 29.2%, while maintaining a moderate debt level with sufficient cash flows to cover interest payments.
Looking ahead, RBC has also updated its projections for Chewy’s financials in the coming years. For 2025 and 2026, the firm now models net sales growth of 4.8% and 8.5%, respectively, with a slight adjustment from the previous estimates. Additionally, RBC anticipates an adjusted EBITDA margin of 5.8% for 2025 and 6.6% for 2026, indicating steady profitability growth for Chewy. InvestingPro analysis reveals that 4 analysts have recently revised their earnings upward for the upcoming period, with the company expected to remain profitable this year. Get access to 11 more exclusive ProTips and comprehensive analysis with an InvestingPro subscription.
The price target of $42 remains anchored on a valuation of approximately 20 times RBC’s revised 2026 adjusted EBITDA estimate, which now stands at $890 million, up from the prior estimate of $881 million. This valuation reflects RBC’s view of Chewy’s potential for sustained growth and margin improvement over the next few years. For deeper insights into Chewy’s valuation metrics and growth potential, explore the comprehensive Pro Research Report available exclusively on InvestingPro, covering what really matters for informed investment decisions.
Chewy’s focus on expanding its customer base and enhancing profit margins aligns with RBC’s positive outlook, suggesting a stable path ahead for the company in a market that remains uncertain for many sectors. The company’s strong return on assets of 13.6% and positive free cash flow yield support this optimistic perspective.
In other recent news, Chewy Inc. reported strong fourth-quarter earnings, with revenue surpassing guidance and adjusted EBITDA margins exceeding expectations. This performance has led Citi analysts to raise the company’s price target to $42, maintaining a Buy rating, while Goldman Sachs adjusted its target to $40 but also kept a Buy rating. UBS increased its price target to $36, maintaining a Neutral rating, citing mixed results but acknowledging Chewy’s return to a growth trajectory. CFRA revised its price target to $42 from $45, maintaining a Strong Buy rating, highlighting Chewy’s solid financial footing with no long-term debt and substantial liquidity.
Needham reiterated a Hold rating, noting that Chewy’s strategic investments in supply chain and customer experience are yielding positive results, although they believe the current stock price reflects a premium valuation. Chewy’s management has emphasized the success of strategic initiatives such as the Autoship program and healthcare offerings, contributing to growth and margin expansion. Analysts have noted the importance of the company’s customer growth, with Citi pointing out a positive low-single-digit increase in customer count. Chewy’s initiatives, including sponsored ads and automation, are expected to drive further profit margin expansion and free cash flow. These developments reflect a broad analyst consensus on Chewy’s potential for sustained growth and profitability.
This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.