Chewy stock clawed its way out of Wall Street's doghouse and posted a huge rally over the past 12 months. With first-quarter earnings due next week, Wall Street analysts are debating whether investors are getting overexcited about the e-commerce website for pet lovers.
To that point, analysts with Jefferies on Thursday downgraded Chewy stock to a neutral view from its previous buy call. Analyst Kaumil Gajrawala said sector trends are holding up, but "nothing we've seen supports significant upside to numbers."
Analysts with UBS are also neutral on Chewy stock. But they upped their price target for the online pet retailer's shares to 46 from a previous 36 in a client note Thursday. Chewy's June 11 earnings release could be a "meaningful catalyst" for the stock, UBS analyst Michael Lasser wrote.
"The stock has had a good run as of late," Lasser said in the client note. "Now, the key debate on the stock surrounds its ability to sustain such profitable growth. The market has been willing to buy into an acceleration story."
The bullish case for Chewy, Lasser added, is that pet adoption trends are stabilizing after a slowdown. Further, Chewy has predictability in an uncertain market through its "Autoship" offering that allows customers to opt for recurring deliveries of pet necessities. But the company has near-term uncertainty in that its CFO will depart soon and the market is already "pricing in a great amount of enthusiasm for the stock."
That mix of factors have UBS remaining neutral overall.
Chewy's Q1 Expectations
On the stock market today, Chewy stock gained a half-percent to close at 47.48. Shares are ahead 42% year-to-date, including a 20% rally in May.
Chewy stock broke out above a cup-with-handle base buy point of 37.91 on May 9, according to IBD MarketSurge. Shares are now extended beyond a 5% buy zone above that entry.
Chewy was recently profiled in Investor's Business Daily's The New America section. A return to customer growth after a post-Covid slowdown helped restart a rally for Chewy stock. Shares peaked near 119 in February 2021 before a slump for Chewy that dragged into early 2024.
For its upcoming report, Wall Street is forecasting another quarter of active customer growth, with total Chewy purchasers projected to rise 3% year over year to 20.6 million.
Analysts polled by FactSet project Chewy's earnings will increase 13% to 17 cents per share. Revenue is seen rising 7% to $3.08 billion.
Chewy Stock A Favorite Of BofA Analysts
Meanwhile, analysts at BofA Securities said earlier this week that Chewy is a top pick for mid-sized tech stocks to navigate tariff uncertainty.
Chewy is a top dog, in their book, for its "consistent share gains against the pet industry, exposure to nondiscretionary and subscription-like sales, and margin expansion (mix shift into pet health and sponsored ads, as well as leverage on at-scale fulfillment/payroll costs)."
BofA analyst Curtis Nagle rates Chewy a buy with a price target of 49.
Chewy stock gained 5% Monday following the bullish call from BofA.
