Chewy's (CHWY) fiscal Q1 sales and Q2 forecast show that customer growth remains strong and the company has potential for "significant" earnings growth in the next few years, BofA Securities said in a note Wednesday.

The firm said Chewy's stock fell 10% after the quarterly results, mostly due to lower-than-expected Q1 profit margins, management not officially raising its full-year 2025 forecast, and high investor expectations going into the earnings report.

However, Q1 results and Q2 outlook suggest that Chewy's market share is expanding and the company is moving toward the higher end of its full-year 2025 revenue target range, according to the note.

BofA analysts said they expect strong earnings growth of 25% for the year, well above the 11% average of its peers, supported by an expected 0.9 percentage point increase in full-year adjusted earnings before interest, taxes, depreciation, and amortization margin.

The brokerage firm said it sees the "potential for significant earnings growth in the next few years as topline trends accelerate, Chewy leverages its at-scale cost base, and ramps margin drivers like advertising, health, and private brands."

BofA Securities maintained its buy rating and $49 price target on Chewy.

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