Chewy Stock Trades at a Discount: Should You Buy or Hold for Now?

Chewy CHWY is a leading player in the pet care industry, utilizing its robust e-commerce platform to serve a growing population of pet owners. CHWY is currently trading at a forward 12-month price-to-sales (P/S) multiple of 1.38X, which positions it at a discount compared with the industry’s average of 2.02X. The critical question for investors now is whether the CHWY stock presents a buy, hold or sell opportunity.CHWY Looks Attractive From a Valuation Standpoint Image Source: Zacks Investment Research This valuation is especially notable when compared with peers such as Central Garden & Pet Company CENT, which has a forward 12-month P/S of 0.75, Petco Health and Wellness Company, Inc. WOOF at 0.15, and BARK, Inc.  BARK at 0.33.CHWY Takes the Lead in Market RallyChewy has witnessed a decent increase in its stock price over the past three months. Closing yesterday’s trading session at $41.86, the stock has rallied 24.3%, outpacing the industry’s rise of 18.2%. Chewy's robust operational scale and capabilities have enabled it to outperform the Retail - Wholesale sector’s 11.5% growth and the S&P 500 index’s 15.1% rise. Image Source: Zacks Investment Research CHWY has outperformed its competitors, including Central Garden & Pet Company, Petco Health and Wellness Company, and BARK. Over the same period, shares of Central Garden & Pet Company have gained 1.1%, while shares of Petco Health and Wellness Company and BARK have declined 2.4% and 33.1%, respectively.CHWY’s Performance vs. Peer Performance Graph Image Source: Zacks Investment Research CHWY Trades Above 50 & 200-Day Moving AveragesTechnical indicators support Chewy's strong performance, with the stock trading above both its 50-day and 200-day moving averages of $41.53 and $35.26. This suggests solid upward momentum and price stability, reflecting positive market sentiment and confidence in Chewy's financial strength and growth prospects. Chewy’s stock stands 13.9% below its 52-week high of $48.62 attained on June 6, 2025. Image Source: Zacks Investment Research Growth Engines Behind Chewy’s Market LeadershipCHWY has delivered an impressive start to fiscal 2025, reflecting its growing leadership in the online pet retail space. For first-quarter fiscal 2025, Chewy generated net sales of $3.12 billion, marking an 8.3% year-over-year increase and exceeding the high end of its guidance range. The company’s disciplined execution and ability to take market share, even in a normalizing pet category environment, demonstrate strong operational momentum and customer engagement.A key driver of Chewy’s continued growth is its Autoship program, which reached a record high of $2.56 billion in sales for the fiscal first quarter. Autoship customer sales accounted for 82% of total net sales and grew 14.8% year over year, significantly outpacing overall company growth. This underscores the program’s role as a reliable engine for predictable revenues, customer loyalty and long-term value creation.Chewy’s active customer base expanded to 20.8 million in the fiscal first quarter, representing a 3.8% year-over-year increase, with approximately 240,000 customers added sequentially. Gross additions remained strong and churn improved, reflecting the success of Chewy’s broader marketing funnel, enhanced digital experience, and category expansion in health and consumables. The company also reported a 3.7% increase in net sales per active customer to $583.The Chewy Vet Care business continues to scale effectively, with 11 clinics operating across four states. Chewy plans to open 8-10 additional clinics in fiscal 2025. The company’s sponsored ads business also remains a bright spot, delivering sequential growth as the company broadens its ad offerings. The Chewy+ membership program has transitioned successfully out of beta, showing promising signs of increased customer engagement, order frequency and cross-category penetration.What to Expect From CHWY in the Future?For fiscal 2025, Chewy expects net sales between $12.3 billion and $12.5 billion, indicating 6-7% year-over-year growth when adjusted to exclude the impacts of the 53rd week in fiscal 2024. The company is maintaining its adjusted EBITDA margin guidance between 5.4% and 5.7%. The midpoint of this range indicates 75 basis points of year-over-year expansion. Approximately 60% of this margin expansion is expected to come from improvements in the gross margin.Upward Estimate Revisions Signal Optimism on CHWY’s EarningsReflecting positive sentiment around Chewy, the Zacks Consensus Estimate for EPS has seen upward revisions. Over the past 30 days, the consensus estimates for the current and next fiscal years have increased by five cents to $1.28 and one cent to $1.53 per share, respectively. (Find the latest EPS estimates and surprises on Zacks Earnings Calendar.) Image Source: Zacks Investment Research What May Derail Chewy’s Momentum?CHWY has continued to showcase resilience through steady revenue growth and customer retention strategies. However, the stock is not insulated from challenges that can weigh on its future performance. Although Chewy delivered an adjusted EBITDA margin of 6.2% in the fiscal first quarter, management guided that the fiscal first quarter would be the peak for this metric, with margins expected to decline sequentially over the rest of the year. This anticipated contraction is driven by typical seasonality, along with higher costs tied to marketing and continued investments in strategic initiatives. While management maintains that tariff exposure is limited, any industry-wide price adjustments can affect demand, especially for discretionary categories like hard goods. The company’s advertising and marketing expenses reached $193.8 million or 6.2% of sales in the fiscal first quarter, reflecting an aggressive push to acquire and retain customers. These expenses are projected to reach the high end of the 6.7-6.8% guidance for the year. This may strain profitability if revenue growth does not pick up.How to Play CHWY Stock: Buy, Hold or Sell?Chewy presents a compelling case for long-term investors seeking exposure to a high-growth, digitally native pet care leader trading at a relative valuation discount. While short-term margin pressure and external risks remain, the company's strong customer engagement, scalable platforms like Autoship and Chewy+, and expanding initiatives such as vet care and sponsored ads reinforce its growth trajectory.Current investors can hold with confidence, while potential investors may consider buying on dips. At present, CHWY carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.Zacks' Research Chief Names "Stock Most Likely to Double"Our team of experts has just released the 5 stocks with the greatest probability of gaining +100% or more in the coming months. Of those 5, Director of Research Sheraz Mian highlights the one stock set to climb highest.This top pick is a little-known satellite-based communications firm. Space is projected to become a trillion dollar industry, and this company's customer base is growing fast. Analysts have forecasted a major revenue breakout in 2025. Of course, all our elite picks aren't winners but this one could far surpass earlier Zacks' Stocks Set to Double like Hims & Hers Health, which shot up +209%.Free: See Our Top Stock And 4 Runners UpWant the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report Central Garden & Pet Company (CENT): Free Stock Analysis Report Petco Health and Wellness Company, Inc. (WOOF): Free Stock Analysis Report Chewy (CHWY): Free Stock Analysis Report BARK, Inc. (BARK): Free Stock Analysis ReportThis article originally published on Zacks Investment Research (zacks.com).Zacks Investment ResearchWeiter zum vollständigen Artikel bei Zacks Weiter zum vollständigen Artikel bei Zacks