Chewy Stock: Navigating High Expectations and Market Realities

Chewy Inc finds itself at a critical juncture as conflicting market forces create uncertainty for the online pet supplies retailer. Despite three consecutive days of declining share prices—with the most recent drop accompanied by above-average trading volume indicating heightened selling pressure—analyst sentiment remains surprisingly positive. This divergence between market performance and professional outlook leaves investors questioning whether the stock is due for a correction or presenting a buying opportunity.

Valuation Concerns Take Center Stage

The core issue facing Chewy revolves around its premium valuation metrics. Trading at a P/E ratio of 31.68, the stock significantly exceeds the industry average of 19.52. The disparity becomes even more pronounced when examining the PEG ratio, which stands at 3.41 compared to the sector’s 1.52. These figures suggest the market has already priced in substantial future growth. Further concern comes from the EV/EBITDA multiple, which has deteriorated by 2-3 points since the beginning of the year and currently sits at 20x. Investors are increasingly questioning whether the company’s growth trajectory can justify such rich valuations.

Upcoming Earnings Report Pivotal for Direction

All eyes now turn to the quarterly earnings report scheduled for September 10th, which many believe will provide clarity on Chewy’s direction. Market experts anticipate revenue of $3.1 billion, representing a 7.8% year-over-year increase. Even more optimistic are the earnings per share projections of $0.33, which would translate to a 37.5% growth rate. However, the raw numbers alone may not suffice to maintain current valuations. Observers will be closely monitoring three key metrics:
* Net customer additions exceeding 20.7 million
* Stability in profit margins
* Potential upward revisions to full-year margin guidance

Should investors sell immediately? Or is it worth buying Chewy Inc?

Analyst Consensus Remains Surprisingly Bullish

Despite recent price weakness, professional analysts maintain a predominantly optimistic stance. Among the 26 brokerage firms covering Chewy, 17 maintain “Buy” recommendations, while eight suggest “Hold” and only one institution recommends selling. The average price target of $43.78 implies an upside potential of over 10% from current levels. This bullishness persists even as some technical analysts have recently downgraded their near-term assessments from “Buy” to “Hold” due to conflicting chart signals. While short-term moving averages indicate selling pressure, longer-term trends continue to suggest buying opportunities.

Long-Term Growth Drivers and Market Positioning

Looking beyond immediate concerns, several strategic factors support the bullish thesis. Research firms including Citizens JMP and BofA Securities point to Chewy’s expansion into veterinary clinics, increasing advertising budget, and the enduring trend of pet humanization as sustainable growth drivers. The company maintained its marketing strategy during major e-commerce events such as Amazon’s Prime Day, demonstrating competitive resilience. Recent options market activity reveals mixed signals, with above-average call volume indicating bullish sentiment while protective puts suggest caution. Institutional investors appear similarly divided—Raymond James reduced its position while BI Asset Management increased its stake.

The upcoming earnings release will ultimately determine whether Chewy’s premium valuation is justified or if a market reassessment becomes inevitable.