BNP Paribas Exane lowers Chewy stock price target to $34 on high expectations

BNP Paribas Exane lowered its price target on Chewy (CHWY) to $34.00 from $38.00, maintaining a Neutral rating due to concerns over high market expectations and the company's messaging on balancing margin flow-through with growth reinvestment. This comes despite Chewy's recent Q2 2025 revenue slightly surpassing predictions and in-line EPS, as the stock declined post-earnings on future guidance and active customer additions that missed some buy-side estimates, contrasting with William Blair's reiterated Outperform rating. The firm's stance highlights valuation concerns despite some operational positives.

Analysis

Chewy Inc. (CHWY) is facing a disconnect between its operational performance and market sentiment, highlighted by BNP Paribas Exane's decision to lower its price target to $34.00 from $38.00 while maintaining a Neutral rating. The firm's caution stems from concerns that market expectations are too elevated and that management's messaging on balancing margin flow-through with growth reinvestment is unclear. This cautious stance is presented despite Chewy's recent Q2 2025 results, which included an in-line EPS of $0.33 and revenue of $3.1 billion that slightly surpassed analyst predictions. The stock's subsequent decline, attributed to future guidance, underscores the market's sensitivity. Further complicating the picture is the sequential addition of 150,000 active customers, a figure that beat sell-side consensus but fell short of more optimistic buy-side estimates of 175,000. In direct contrast to BNP's view, William Blair reiterated an Outperform rating, citing modest improvements in sales and margins. This divergence encapsulates the current debate: while fundamentals show steady growth and BNP remains constructive on initiatives like Fresh Food and Chewy+, the stock's valuation and near-term growth narrative are under significant scrutiny.

Key Decisions for Investors

• Investors should scrutinize management's future guidance and commentary on the trade-off between margins and growth reinvestment, as this is a key point of contention for analysts and a primary driver of recent negative sentiment.
• Given the conflicting analyst ratings, with BNP Paribas at Neutral and William Blair at Outperform, investors may consider the stock range-bound until a clearer trend emerges in customer acquisition metrics and margin expansion.
• For those bullish on the long-term consumer pet market, the post-earnings stock decline could present a potential entry point, but this position carries the risk that forward guidance may continue to disappoint elevated market expectations.