Chewy Analysts Slash Their Forecasts Following Q2 Results

Chewy Inc. (CHWY) reported robust second-quarter results, with adjusted earnings of $0.33 per share significantly surpassing the $0.14 consensus and sales reaching $3.10 billion, an 8.6% year-over-year increase. The company also saw active customers grow 4.5% to nearly 21 million and raised its fiscal 2025 sales guidance to $12.5 billion-$12.6 billion. Despite these strong operational and financial beats, which led to a 2.7% share gain, multiple analysts maintained their ratings but concurrently lowered their price targets on CHWY.

Analysis

Chewy Inc. delivered a strong second quarter for fiscal 2025, significantly outperforming market expectations and its own guidance. The company reported adjusted earnings of 33 cents per share, more than double the 14-cent consensus, and sales of $3.10 billion, an 8.6% year-over-year increase that surpassed the $3.08 billion consensus. This top-line growth was supported by solid operational metrics, including a 4.5% year-over-year expansion in both the active customer base to nearly 21 million and net sales per active customer (NSPAC) to $591. Management's outlook remains robust, with third-quarter guidance for both earnings and sales exceeding analyst forecasts and a raised full-year 2025 sales forecast to $12.5 billion-$12.6 billion. Despite these positive results and forward guidance, which prompted a modest 2.7% share price gain, a broad consensus of eight investment banks, including Barclays, Morgan Stanley, and JP Morgan, concurrently lowered their price targets on the stock. While most maintained bullish ratings such as 'Overweight' or 'Buy', this uniform reduction in price targets suggests a valuation recalibration, possibly reflecting concerns about macroeconomic pressures, sector-wide multiple compression, or long-term growth rates not captured in the near-term guidance.

Key Decisions for Investors

• Investors should recognize the strong operational momentum demonstrated by Chewy's significant earnings beat, customer growth, and upwardly revised guidance, which validates the company's execution and market position.
• The widespread reduction in analyst price targets, despite maintained 'Buy' and 'Overweight' ratings, signals a potential valuation disconnect; it is critical to investigate whether this stems from revised long-term growth assumptions or broader market multiple compression.
• Given the conflicting signals of strong fundamental performance against tempered analyst price expectations, a prudent approach may be to hold existing positions while monitoring for further clarity on valuation drivers, or for new investors to view the current price as a potentially attractive entry point but with a more constrained upside than previously anticipated.