TD Cowen cuts Chewy stock price target on macro headwinds By Investing.com

TD Cowen cut Chewy’s price target to $34 from $42 while keeping a Buy rating, citing macro headwinds and a weaker fiscal 2026 revenue outlook. Chewy lowered FY2026 revenue guidance to $13.4 billion-$13.55 billion from $13.6 billion-$13.7 billion and said quarterly active customer growth should land at the low end of 150,000-250,000. Q1 revenue of $3.4 billion and EBITDA of $253.1 million both beat estimates, but the stock still fell about 2% and is down 51% over the past year.

Analysis

The market is treating this as a plain consumer-demand miss, but the bigger issue is mix degradation: when premium attachment and basket expansion weaken, the earnings model becomes more levered to acquisition spend just to keep growth flat. That is a second-order margin risk because lower-quality growth usually shows up first in marketing efficiency and fulfillment absorption, even if EBITDA can still beat for a quarter or two.

The interesting competitive implication is that value-oriented pet retailers and general merchandisers should be relatively better insulated in the next 2-3 quarters. If Chewy is forced to lean harder into promotions or shipping incentives to defend active-customer adds, it effectively subsidizes share retention for competitors with broader discretionary baskets and denser store networks. The pressure is less about losing absolute customers immediately and more about losing wallet share per customer, which is harder to reverse once habits reset.

Consensus may be underestimating how quickly guidance resets can cascade into multiple compression when a high-multiple growth name loses confidence in its terminal growth assumptions. At ~52-week lows, the stock is pricing in a decent amount of disappointment already, but the next catalyst is likely not a rebound in the top line; it is whether management can stabilize net sales per active customer over the next 1-2 quarters. If that metric keeps deteriorating, the bear case shifts from cyclical to structural.

The contrarian setup is that the selloff could be overdone if macro is merely deferring spend rather than destroying it, because pet demand has historically reaccelerated once comparison periods ease. Still, the burden of proof is now on management to show that EBITDA beats are not being manufactured by temporary cost control while revenue quality erodes underneath.

Key Decisions for Investors

• Short CHWY into any post-earnings relief rally over the next 1-3 weeks; risk/reward favors using strength to fade because multiple expansion will be capped until customer productivity stabilizes.
• Buy CHWY put spreads 1-2 quarters out, targeting a continuation move toward the prior low with defined premium risk; best if the next monthly data points confirm soft attachment and weak customer growth.
• Pair trade: long pet-sector winners with better traffic resilience / lower valuation complexity against short CHWY for 1-2 quarters; the long leg should be a retailer with broader basket exposure and less dependence on premium mix.
• If long CHWY at all, size only for a mean-reversion trade and hedge with a tight stop below the recent low; the bull case needs a clear inflection in customer monetization, not just another EBITDA beat.