Chewy has gotten torched over the last six months - since October 2025, its stock price has dropped 32.4% to $26.43 per share. This may have investors wondering how to approach the situation.
Is there a buying opportunity in Chewy, or does it present a risk to your portfolio? Check out our in-depth research report to see what our analysts have to say, it’s free.
Why Is Chewy Not Exciting?
Even with the cheaper entry price, we don't have much confidence in Chewy. Here are three reasons why CHWY doesn't excite us and a stock we'd rather own.
1. Long-Term Revenue Growth Disappoints
Examining a company’s long-term performance can provide clues about its quality. Any business can put up a good quarter or two, but the best consistently grow over the long haul. Regrettably, Chewy’s sales grew at a tepid 7.6% compounded annual growth rate over the last three years. This fell short of our benchmark for the consumer internet sector.
2. Projected Revenue Growth Is Slim
Forecasted revenues by Wall Street analysts signal a company’s potential. Predictions may not always be accurate, but accelerating growth typically boosts valuation multiples and stock prices while slowing growth does the opposite.
Over the next 12 months, sell-side analysts expect Chewy’s revenue to rise by 8.6%, This projection doesn't excite us and indicates its newer products and services will not lead to better top-line performance yet.
3. Low Gross Margin Reveals Weak Structural Profitability
For online retail (separate from online marketplaces) businesses like Chewy, gross profit tells us how much money the company gets to keep after covering the base cost of its products and services, which typically include the cost of acquiring the products sold, shipping and fulfillment, customer service, and digital infrastructure.
Chewy’s unit economics are far below other consumer internet companies because it must carry inventories as an online retailer. This means it has relatively higher capital intensity than a pure software business like Meta or Airbnb and signals it operates in a competitive market. As you can see below, it averaged a 29.5% gross margin over the last two years. That means Chewy paid its providers a lot of money ($70.48 for every $100 in revenue) to run its business.
Final Judgment
Chewy isn’t a terrible business, but it doesn’t pass our quality test. Following the recent decline, the stock trades at 11.8× forward EV/EBITDA (or $26.43 per share). This valuation is reasonable, but the company’s shakier fundamentals present too much downside risk. We're pretty confident there are more exciting stocks to buy at the moment. Let us point you toward the Amazon and PayPal of Latin America.
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