1 Growth Stock Down 36% in 2026 to Buy and Hold

Invest in growth stocks long enough, and the stock market will give you a gut check at some point. Popular online pet retailer Chewy (NYSE: CHWY) has had a rough 2026, falling more than 36% since January. It's enough to make a reasonable person question whether they're missing something the market is trying to tell them.

But stock prices don't always send clear signals. Instead, Chewy's extended decline looks like an excellent buying opportunity, at least once you cut through the noise. Here's the biggest reason the stock likely dropped, and why investors might buy and hold this top e-commerce stock right now.

Image source: The Motley Fool.

Valuation is a major driver behind Chewy's slide

Growth stocks can sometimes swing very far in both directions. The market can send a hot growth stock to astronomical prices, then leave it for dead when momentum turns against it. Chewy was trading at more than 119 times its trailing-12-month earnings when the stock peaked last fall. The market turned against Chewy after growth slowed throughout 2025 as post-pandemic spending continued to fluctuate and tariffs put financial strain on consumers.

It's normal for a company to ebb and flow over time, but high valuations aren't very forgiving. The good news is that sales have continued to grow, as have Chewy's non-GAAP (generally accepted accounting principles) earnings per share, once you adjust for a one-time tax benefit that artificially inflated the company's profits in 2024. At the same time, the stock's valuation has come back to Earth, now at a more reasonable 35 times trailing-12-month earnings.

A strong starting point for new money

Remember, stocks have no memory. It ultimately doesn't matter where it traded before. The opportunity begins now and looks forward. At 35 times earnings, Chewy's continued growth seems more likely to translate into capital appreciation moving forward. Analysts currently estimate that Chewy will grow earnings by an average of 24% to 25% annually over the next three to five years. That growth rate easily justifies buying and holding the stock today.

The growth estimates also look attainable. The American Pet Products Association estimated the total U.S. pet industry at $158 billion last year and expects it to continue growing. Chewy's trailing-12-month revenue of $12.8 billion shows that there's still a lot of market share up for grabs. The company has rolled out telehealth services, prescription food and drugs, opened veterinary clinics, and expanded outside the United States. It added 200,000 net active customers in the first quarter of 2026.

Stock prices will always fluctuate, especially for growing companies such as Chewy. But as long as you believe in the business and it continues to deliver as it should, these painstaking declines can actually be the best opportunities.

Justin Pope has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Chewy. The Motley Fool has a disclosure policy.