Should You Buy Chewy Stock Before March 25?
Key Points
Chewy’s stock has plunged over the past few years.
But its business is stabilizing, and its stock looks undervalued.
- 10 stocks we like better than Chewy ›
Chewy (NYSE: CHWY), the largest online pet retailer in the United States, will report its fourth quarter and full-year earnings on March 25. Should you buy its stock -- which has declined more than 70% over the past five years -- before it posts those latest numbers?
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Why did Chewy's stock stumble over the past few years?
Chewy challenged brick-and-mortar pet stores by selling products online, and it grew rapidly in fiscal 2020 (which ended in Jan. 2021) as more pet owners stayed home during the pandemic. During that year, its active customers surged by 43%, its net sales per active customer rose by 3%, and its total net sales increased by 47%. But like many niche e-commerce players, Chewy couldn't sustain that momentum after the pandemic passed.
|
Metric |
FY 2021 |
FY 2022 |
FY 2023 |
FY 2024 |
9M 2025 |
|---|---|---|---|---|---|
|
Active Customer Growth (YOY) |
8% |
(1%) |
(2%) |
2% |
5% |
|
Net Sales per Active Customer Growth (YOY) |
16% |
8% |
8% |
4% |
5% |
|
Net Sales Growth (YOY) |
24% |
13% |
10% |
6% |
8% |
Data source: Chewy. YOY = Year-over-year.
As Chewy lapped its pandemic-fueled growth spurt, inflation and other macro headwinds throttled its sales of non-essential pet products. It also faced tougher competition from Amazon, which aggressively expanded its private-label pet product line.
Is Chewy's business stabilizing?
Over the past two years, Chewy's top-line growth stabilized as it locked more customers into its recurring Autoship subscriptions, expanded its private-label product portfolio, sold more integrated ads across its marketplace, and offered more pet health insurance plans. It also opened more Vet Care clinics and expanded its Chewy+ tier, which provides free shipping, 5% rewards on most purchases, exclusive offers, and other benefits for $79 per year.
In the third quarter of 2025, Chewy generated 83.9% of its net sales from Autoship customers, up from 79.2% in fiscal 2024. It hasn't disclosed its total number of Chewy+ subscribers yet.
When Chewy posts its fourth-quarter earnings, investors should see if those metrics keep improving. They should also see if its adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) margin -- which has expanded over the past four years -- continues to rise as it cuts costs while growing net sales per customer. If it checks all those boxes, its business could be stabilizing -- even if its high-growth days are over.
(CARD)
Should you buy Chewy's stock before March 25?
For 2025, analysts expect Chewy's revenue and adjusted EBITDA to rise 6% and 25%, respectively. For 2026, they expect its revenue and adjusted EBITDA to grow 7% and 24%, respectively, as it continues to expand its ecosystem of prisoner-taking services.
With an enterprise value of $8.9 billion, Chewy looks undervalued at just 9 times next year's adjusted EBITDA. Therefore, if you expect Chewy's core metrics to continue improving in the fourth quarter, then it might be a great time to accumulate its out-of-favor stock.
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Leo Sun has positions in Amazon. The Motley Fool has positions in and recommends Amazon and Chewy. The Motley Fool has a disclosure policy.
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