Chewy (CHWY) is winning renewed attention from investors, even as its stock has fallen about 11% since the market's February peak.
In comparison to the S&P 500’s 12% drop over the same period, Chewy’s relative resilience is telling. Consumers may be cutting back, but not when it comes to their pets—a fact that continues to support the company’s steady performance.
Chewy’s fourth-quarter earnings added fuel to the bullish case. Sales reached $3.25 billion, a 7% year-over-year gain when adjusting for the extra week in the quarter, beating analyst expectations. The company surpassed earnings forecasts for the 16th time in 20 quarters and grew its customer base to 20.5 million—well above projections. Average spending per user also rose, reinforcing the power of Chewy’s autoship program, which now accounts for roughly 80% of the company’s trailing revenue.
While guidance for fiscal 2025 calls for 6.5% revenue growth, some analysts believe that outlook may be conservative, particularly as the pet market stabilizes post-pandemic.
Chewy’s fourth-quarter earnings added fuel to the bullish case. Sales reached $3.25 billion, a 7% year-over-year gain when adjusting for the extra week in the quarter, beating analyst expectations. The company surpassed earnings forecasts for the 16th time in 20 quarters and grew its customer base to 20.5 million—well above projections. Average spending per user also rose, reinforcing the power of Chewy’s autoship program, which now accounts for roughly 80% of the company’s trailing revenue.
While guidance for fiscal 2025 calls for 6.5% revenue growth, some analysts believe that outlook may be conservative, particularly as the pet market stabilizes post-pandemic.
Vet Sentiment Turns Positive as Clinics Expand
Piper Sandler remains bullish on Chewy, citing encouraging survey data from veterinarians. According to the firm, 59% of vets expect pet ownership to grow by 2026, and adoption trends are already picking up modestly in 2025. Chewy is the second-largest payer in the pet health space, trailing only Amazon, and vets are increasingly favoring Chewy over smaller competitors like PetMeds.
Chewy’s growing footprint in veterinary services adds another tailwind. The company currently operates eight clinics, with plans to add up to ten more in 2025. More than half of surveyed vets are aware of Chewy’s clinic network—a significant milestone for a business still in its early stages of healthcare expansion. These high-margin services, along with investments in pharmacy and advertising solutions, are expected to boost profitability over time.
Piper Sandler remains bullish on Chewy, citing encouraging survey data from veterinarians. According to the firm, 59% of vets expect pet ownership to grow by 2026, and adoption trends are already picking up modestly in 2025. Chewy is the second-largest payer in the pet health space, trailing only Amazon, and vets are increasingly favoring Chewy over smaller competitors like PetMeds.
Chewy’s growing footprint in veterinary services adds another tailwind. The company currently operates eight clinics, with plans to add up to ten more in 2025. More than half of surveyed vets are aware of Chewy’s clinic network—a significant milestone for a business still in its early stages of healthcare expansion. These high-margin services, along with investments in pharmacy and advertising solutions, are expected to boost profitability over time.
ROCE Growth, Loyal Customers, and a Path to Profitability
Behind Chewy’s operational momentum is a notable improvement in capital efficiency. Return on Capital Employed (ROCE) has climbed to 14%, up from negative territory just four years ago, and the company has more than doubled the capital it deploys. This is a classic sign of a business finding profitable reinvestment opportunities—a trait investors often associate with long-term compounders.
Financially, Chewy’s free cash flow reached $452 million in the last fiscal year, up from $343 million the year prior. Margins are expected to expand steadily, with analysts forecasting operating margins to exceed 5% by 2030, up from just 1% last year. Adjusted EPS is projected to grow at an 11% annual rate over the next six years.
At 27 times forward earnings, Chewy trades at a premium to the broader market—but the valuation reflects strong expectations for margin expansion, top-line growth, and market share gains. Wall Street seems to agree: the stock has an average price target of $39.87, implying a 21% upside from recent levels.
Conclusion
Chewy is positioning itself not just as a pet product retailer but as a full-service ecosystem for pet owners. With improving fundamentals, growing customer loyalty, and new high-margin verticals like veterinary care, the company is increasingly viewed as a long-term compounder. If the pet economy continues to recover, and Chewy executes on its strategic vision, the stock could have far more bite than bark.
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