Chewy Just Popped. Is the Pet Stock a Buy Now?

Shares of Chewy (NYSE: CHWY), the leading pet products retailer, were soaring on Wednesday after the company delivered a better-than-expected outlook for 2026, although the growth in the fourth quarter was modest.

Adjusted for the extra week in the quarter a year ago, revenue rose 8.1% to $3.26 billion, which matched estimates. Margins improved with gross margin up 90 basis points to 29.4%, and adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) rose from $124.5 million to $162.3 million.

Chewy was also profitable on a generally accepted accounting principles (GAAP) basis in the quarter, and it reported an adjusted per-share profit of $0.27, which was down from $0.28 in the quarter a year ago, but that includes an extra week. The analyst consensus was $0.28 as well.

While the quarterly results were in line with the estimates, the reason the stock rose by double digits seemed to be Chewy's guidance, which called for revenue to grow 8%-9% to $13.6 billion-$13.75 billion. That forecast includes its recent acquisition of SmartEquine, an equine health company, and the range topped the average estimate of $13.59 billion. For the first quarter, the company expects revenue growth of 7%-8% to $3.33 billion-$3.36 billion and adjusted earnings per share of $0.40-$0.45, which was in line with estimates.

Image source: Getty Images.

What else is going right for Chewy

Chewy continues to expand beyond its core business as an e-commerce platform. While the company is growing its online retail business and converting more customers to autoship, its subscription service, it needs to add new business lines to grow long-term and deliver a return to investors.

One of its biggest growth opportunities is Chewy Vet Care (CVC), its store-based veterinary practice. It added 10 new practices last year, bringing its grand total to 18, and doing so helps it better compete with brick-and-mortar retailers like Petco, which are adding veterinary services to their stores. CEO Sumit Singh said that performance from CVC is exceeding expectations with high satisfaction scores from both customers and veterinarians. The veterinary practice also boosts the core business by functioning as a customer acquisition engine and strengthens relationships with high-value customers. Chewy also said CVC is the fastest compounder in net sales per active customer in the business.

The SmartEquine acquisition is expected to contribute about $80 million in net sales to the company this year, or less than 1% of its revenue, but that move helps expand the business beyond household pets.

Is Chewy a buy?

Chewy has established itself as the leader in the pet products retail market, and it's one of the few pure-play e-commerce companies that has successfully fended off competition from Amazon through tactics like personalization and autoship.

Chewy's efforts to branch out with veterinary care and the SmartEquine acquisition also look like smart moves, even though they contribute minimal revenue currently. CVC operates in just five states, though the company intends to expand its operations across the country.

Based on adjusted earnings, Chewy stock looks cheap, trading at a price-to-earnings ratio of just 21 after falling sharply after the pandemic. While Chewy's growth rate leaves something to be desired and may be reflective of the maturity in the pet products market, the current valuation seems fair, and new initiatives like CVC and the SmartEquine acquisition could drive the stock higher over the long term.

After a solid earnings report, Chewy looks like a buy heading into 2026.

Jeremy Bowman has positions in Amazon. The Motley Fool has positions in and recommends Amazon and Chewy. The Motley Fool has a disclosure policy.