Chewy Inc (CHWY) opened in the “red” this morning after coming in shy of EPS estimates for its fiscal Q1 and offering guidance that signals continued weakness in the current quarter.
Investors are bailing on CHWY mostly because the financial release reinforces CEO Sumit Singh’s recent comment that the US consumer is more “stretched” than at the beginning of 2026.
Speaking at a JPMorgan conference, Singh said customers are buying essential items like pet food and medicine, but spending less on extras like toys due to resurfacing inflationary pressures.
Still, for those in it for the long haul, Chewy stock appears rather compelling after the post-earnings decline.
Chewy stock is being unfairly punished
At the time of writing, CHWY shares are trading at a 52-week low of just under $20, representing a nearly 40% year-to-date decline – yet the underlying business is still growing.
In Q1, revenue was up 7.7% year-on-year, gross margin improved by 50 bps to a solid 30.1%, and adjusted EBITDA went up $60 million.
So this clearly isn’t a company in distress – it’s a company being priced like one (0.67x sales).
Autoship program to drive CHWY shares higher
Chewy shares remain worth owning also because of its Autoship subscription program that’s really the backbone of its revenue – it drives recurring, predictable, largely recession-resistant demand.
Pet food and medicine aren’t discretionary. Yes, customers are cutting back on toys and accessories – but the core recurring order business is sticky and hard for competitors to disrupt easily.
Moreover, the company’s push into pet healthcare (Vet Care clinics) and its pharmacy/prescription business is an under-appreciated growth vector that doesn’t show up clearly in the near-term revenue outlook.
As that segment scales, it will help expand the addressable market and deepen “customer lock-in” beyond the commodity grocery/supplies business – potentially driving the stock price higher over time.
Macro weakness affecting Chewy is temporary
Investors should also note that CEO Sumit Singh’s recent dovish consumer commentary reflects the current inflationary environment – not a permanent shift in pet ownership economics.
Pet spending has proven remarkably “resilient” through previous downturns; when inflation eases, discretionary pet spending (the category weighing on guidance) typically snaps right back.
Simply put, at current levels, you are essentially buying a premium business at a trough valuation tied to a temporary macroeconomic cycle.
Finally, Ryan Cohen’s gradual exit has been a persistent “seller-of-record” weight on CHWY stock for years.
As that overhang clears, the technical selling pressure structurally diminishes, removing a ceiling that has suppressed its recovery.
Together, these positives are keeping Wall Street bullish on Chewy Inc, with the consensus rating staying put at “Strong Buy”, and the mean price target of $40 signaling potential upside of roughly 100% from current levels.
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