Chewy upgraded by Seaport and Deutsche Bank on growth and share gains

Chewy (CHWY) received dual 'Buy' upgrades from Seaport Research and Deutsche Bank, with respective price targets of $47 and $45, following its second-quarter earnings. Analysts cited robust top-line momentum, 8.6% year-over-year revenue growth, and resilient margins as key drivers. Both firms expressed increased confidence in Chewy's long-term growth trajectory and earnings power, attributing this to strategic investments in initiatives like Chewy+ and fresh food, which are expected to drive future share gains and expand EBITDA margins despite recent SG&A cost pressures.

Analysis

Chewy, Inc. (CHWY) has garnered significant bullish sentiment from Wall Street, evidenced by analyst upgrades to 'Buy' from both Seaport Research and Deutsche Bank. The upgrades are supported by the company's second-quarter performance, which featured 8.6% year-over-year revenue growth and resilient margins. Seaport Research set a $47 price target, highlighting continued market share gains and a clear path toward long-term EBITDA margins exceeding 10%, driven by scale efficiencies. While acknowledging that higher SG&A costs have recently pressured the stock, both firms view these expenditures as strategic investments in future growth drivers, such as the Chewy+ membership program and expansion into fresh food. Deutsche Bank, which set a $45 price target, explicitly noted a shift in its outlook; initial concerns about investment costs weighing on earnings have been replaced by confidence that these initiatives will enhance long-term earnings power and provide multiple levers for accelerated revenue growth in 2026 and beyond.

Key Decisions for Investors

• Investors should view the dual upgrades as a strong positive signal, particularly as both analyses look beyond near-term SG&A spending to focus on the long-term earnings potential from strategic growth initiatives.
• The recent stock pressure attributed to higher costs may represent a compelling entry point for long-term investors who align with the analysts' thesis that investments in fresh food and loyalty programs will drive future market share and margin expansion.
• It is crucial to monitor the performance of Chewy's new initiatives and net sales per active customer in coming quarters to validate the thesis that current investments are effectively building a foundation for accelerated growth and higher profitability.