UBS raises Chewy stock price target to $36 from $34

On Thursday, UBS analyst Michael Lasser updated his assessment of Chewy Inc . (NYSE:CHWY), increasing the price target on the company’s shares to $36.00, up from the previous target of $34.00. The firm maintained a Neutral rating on the stock. Currently trading at $33.15, Chewy has demonstrated strong momentum with a remarkable 112% return over the past year. According to InvestingPro data, analyst targets for the stock range from $31 to $47.

Lasser’s commentary followed Chewy’s fourth-quarter earnings, which he noted showed the company’s continued progress toward achieving sustainable growth. The report sparked a robust debate among investors, with some focusing on the lower-than-expected gross margin growth and a deceleration in wallet share growth. Conversely, others might emphasize the positive aspects, such as the higher-than-anticipated increase in customer count and the predictability of Chewy’s business model. The company maintains a healthy gross profit margin of 29.2% and has shown consistent revenue growth, with InvestingPro analysis indicating strong financial health scores and positive earnings expectations.

Despite the mixed results, Lasser expressed the belief that the quarter ultimately highlighted Chewy’s return to an attractive growth trajectory, with profitability expected to improve. He acknowledged that while certain strategic initiatives did not take center stage this quarter, Chewy possesses several opportunities to expand its customer base and demonstrate operational profitability.

Lasser concluded that while Chewy is on the path to growth and profitability, it may take time for the company’s valuation to fully reflect the potential opportunities that lie ahead. This balanced view underpins the rationale for the adjusted price target while maintaining a Neutral stance on the stock.

In other recent news, Chewy Inc. reported fourth-quarter earnings that exceeded expectations, with revenue reaching $3.078 billion, surpassing both Wall Street and Evercore ISI’s forecasts. The company experienced significant growth in active customers, adding 354,000 in the quarter, marking the highest increase since 2021. Following these results, several analyst firms adjusted their outlooks on Chewy. Needham maintained its Hold rating, citing that the current stock price reflects a premium valuation despite Chewy’s strategic investments and positive customer growth.

Goldman Sachs, while reducing its price target from $45 to $40, maintained a Buy rating, emphasizing Chewy’s potential in digitizing the pet care sector and expanding strategic initiatives. Citi increased its price target to $42, maintaining a Buy rating, and highlighted Chewy’s strong auto-ship business and customer growth as key factors for future success. Mizuho (NYSE:MFG) also raised its price target to $43, maintaining an Outperform rating, and noted Chewy’s promising growth trajectory and cautious strategy that could lead to future financial beats.

Evercore ISI reaffirmed its positive outlook with an Outperform rating and a $47 price target, acknowledging Chewy’s improved profitability trends and significant customer growth. These developments suggest that Chewy’s strategic initiatives and market dynamics are supporting its continued success, with analysts expressing varying degrees of optimism about the company’s future prospects.

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