Chewy Inc. CHWY has shown an impressive run on the bourses, rallying 14.5% in the past month. The stock has comfortably outpaced the industry, which declined 2%. However, with shares already up, investors are contemplating whether Chewy still has room to run or if it’s time to take profits.

CHWY Stock Past Month Performance

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Chewy operates in a highly price-sensitive market, where competitors such as Petco Health and Wellness Company, Inc. WOOF, Central Garden & Pet Company CENT and BARK, Inc. BARK quickly adjust their pricing strategies to attract customers.

Nonetheless, CHWY is undergoing a pivotal transformation, evolving from a pure-play e-commerce retailer into a diversified pet care platform. Active customer growth, increasing Autoship penetration and strategic focus on high-margin services are strengthening its position. 

Chewy has even outperformed Petco Health and Wellness Company Central Garden & Pet Company and BARK. Shares of Petco Health and Wellness Company, Central Garden & Pet Company and BARK have declined 1%, 5.7% and 15.8%, respectively, over the past month.

CHWY, WOOF, CENT & BARK Past Month Stock Performance

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Chewy stock closed at $37.21 yesterday, sitting 7.2% below its 52-week high of $40.09 reached on Jan. 30, 2025. However, CHWY is trading above its 50 and 200-day moving averages, suggesting a bullish trend. With that in mind, let’s dive into CHWY’s prospects and determine the best course of action for your portfolio.

CHWY Trades Above 50 & 200-Day Moving Averages

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Chewy’s Autoship Program Powers Revenue Growth

Chewy has built a strong foothold in the online pet retail industry by focusing on innovation and customer loyalty. With a growing customer base, a steady stream of revenues and an expanding portfolio that includes veterinary and pharmacy services, CHWY is well-positioned for long-term growth. 

The company’s Autoship program remains a key driver of its success, generating $2.62 billion in sales in the fourth quarter of fiscal 2024, reflecting a 21.2% increase year over year. This underscores its critical role in ensuring predictable, recurring revenues, improving inventory planning and boosting customer lifetime value. Moreover, growth in Autoship sales, which now represents a substantial 80.6% of total net sales, outpaced overall top-line growth by 630 basis points during the quarter under review.

Chewy returned to year-over-year active customer growth in fiscal 2024. The company ended the year with 20.5 million active customers, a 2.1% increase compared to the prior year. New customer acquisitions, reactivations and improved gross churn all contributed to this turnaround. Management expects active customer growth to continue into 2025. The net sales per active customer rose 4.1% year over year to reach $578 in the final quarter, marking an increase in wallet share.

The company’s entry into the veterinary services market through Chewy Vet Care Clinics has unlocked access to a $25 billion total addressable market. Having opened eight Chewy Vet Care Clinics in fiscal 2024, the company plans to open eight to ten new clinics in fiscal 2025. These clinics serve as effective entry points for attracting new customers and integrating them into Chewy’s broader ecosystem. The Chewy+ Membership Program has also shown encouraging results, signaling potential for enhanced customer retention.

A Sneak Peek Into Chewy’s Financials

Chewy’s strong financial position is validated by its free cash flow generation of $452.5 million in fiscal 2024. The company ended the fiscal year with $597 million in cash, cash equivalents and marketable securities while remaining debt-free, which provides it with significant financial flexibility. Chewy also returned capital to shareholders, repurchasing approximately 32.8 million shares.

Chewy Foresees Sales Growth

Chewy remains optimistic about its growth trajectory, expecting net sales of $12.3 billion to $12.45 billion for fiscal 2025, representing 6% to 7% year-over-year growth. The company anticipates continued margin expansion with adjusted EBITDA margin projected between 5.4% and 5.7% compared with 4.8% in fiscal 2024. For the first quarter of fiscal 2025, Chewy foresees net sales in the band of $3.06 billion-$3.09 billion, suggesting 6% to 7% year-over-year growth.

Unlocking CHWY’s Valuation

Chewy is currently trading at a forward 12-month price-to-sales (P/S) multiple of 1.22X, which positions it at a discount compared to the industry’s average of 2.09X. This favorable valuation highlights an opportunity to invest in Chewy’s promising growth at a reasonable price.
 

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Is the Buying Window Closed for CHWY Stock?

Chewy has seen impressive growth recently, outperforming its competitors in the pet care market. As it evolves into a diversified pet care platform, Chewy's strategic initiatives, like the Autoship program and expansion into high-margin services, underscore its resilience and growth potential. Despite recent gains, the stock remains attractively valued relative to its peers, supported by strong financial health and optimistic sales projections for fiscal 2025. CHWY currently carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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Central Garden & Pet Company (CENT) : Free Stock Analysis Report

Petco Health and Wellness Company, Inc. (WOOF) : Free Stock Analysis Report

Chewy (CHWY) : Free Stock Analysis Report

BARK Inc. (BARK) : Free Stock Analysis Report

This article originally published on Zacks Investment Research (zacks.com).

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