This Stock Soared 12% After Its Blowout Earnings Outlook at the End of March, But It's Not Too Late to Buy

When a stock goes up more than 10% in a single day, it can feel as if you've missed the opportunity to buy shares at a great price. But more often than not, a stock that goes up on positive earnings results or a fantastic outlook still has plenty of room to keep climbing. Better-than-expected earnings results or outlooks are a sign of a strong company -- the kind of company long-term investors should look to buy.

That's why investors should take a closer look at Chewy (NYSE: CHWY), which provided a very rosy outlook for 2026 alongside its fourth quarter earnings report at the end of March, immediately sending shares 12% higher.

Image source: Getty Images.

The one-stop pet care shop

Chewy's management expects to build on its 8.3% revenue growth in 2025 with 8.5% growth at the midpoint of its 2026 guidance. What's more, it expects further EBITDA margin expansion, increasing from 5.7% to between 6.6% and 6.8% this year.

Over the long term, management expects to generate EBITDA margin above 10%, as outlined at its 2023 investor day. Management is executing well on its initiatives to expand the top of its funnel, introduce new higher-margin products, and reduce operating expenses in an effort to meet that goal.

Chewy added 10 new Vet Care clinics in 2025, bringing its total to 18. The initiative offers a smart way to drive customers to the Chewy brand and increase customer loyalty. Chewy can fill medication prescriptions through its pet pharmacy and provide additional over-the-counter medications and treatments as well. Its pet insurance business goes hand in hand with the veterinary locations, and it offers another way to bring customers in the digital door.

Meanwhile, Chewy has increased investments in private labels after the successful launch of its "Get Real" food brand. "Chewy Made" expands the private-label consumables to include dog and cat treats and less premium food options. It's also bringing smaller private labels under the new brand name. Increasing private-label sales should continue to drive gross margin expansion.

On top of that, Chewy continues to see strong growth in its retail advertising business. Management doesn't provide details on its Sponsored Ads business, but CFO Chris Deppe said it was a key driver of gross margin expansion in 2025. He notes that impact will taper off in 2026, though.

Finally, Chewy's Autoship business makes the whole e-commerce business work. Roughly 84% of Chewy's net sales were autoshipped in the fourth quarter, up from 80.6% at the end of 2024. The program provides inventory management predictability for Chewy while reducing overall shipping costs, enabling it to grow its operating margin while keeping retail prices relatively low. What's more, it increases customer loyalty and how much they spend with Chewy each year.

Even after the market's positive reaction to management's outlook, the stock still trades for an attractive valuation. The company's enterprise value is just 12 times EBITDA expectations. That's despite implied EBITDA growth of 25% to 30% this year based on management's outlook.

Adam Levy 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.