Chewy (CHWY) is drawing fresh attention after highlighting pet healthcare as a key long-term focus, supported by its acquisition of veterinary clinic operator Modern Animal and the buildout of the Chewy Vet Care network.

The recent focus on pet healthcare comes as Chewy’s share price has shown short-term momentum, with a 1-month share price return of 9.67% and a 7-day gain of 3.16%. However, the stock remains under pressure with a year to date share price decline of 36.67% and a 1-year total shareholder return decline of 44.13%.

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Chewy’s latest bounce sits between two stories, one about renewed confidence in its pet healthcare push and another about sentiment snapping back after a steep slide. Which version of Chewy’s business does the current valuation reflect?

Most Popular Narrative: 31.7% Undervalued

Chewy's most followed narrative pegs fair value at $31.05 against a last close of $21.21, putting a spotlight on how pet health, Autoship and advertising could reshape the story from here.

The company's increased focus on innovation, such as the Chewy+ membership and mobile app improvements, is driving new customer acquisition and higher conversion rates, enhancing both revenue growth and net sales per active customer (NSPAC).
Active customer growth has reached an inflection point, with expectations for continued growth in 2025 due to improved marketing strategies and customer acquisition channels, positively affecting top-line revenue.

Want to see what this narrative is really baking in for Chewy? The entire case leans on steady revenue gains, higher margins and a future earnings multiple that assumes the business earns a premium. Curious which mix of growth, profitability and discount rate gets you to that $31.05 figure?

Result: Fair Value of $31.05 (UNDERVALUED)

However, Chewy’s heavy reliance on Autoship for over 80% of sales, combined with modest active customer growth, means any shift in consumer behavior could quickly challenge this upside story.

Another View on Chewy: Price Tag vs Potential

The first narrative paints Chewy as 31.7% undervalued at a fair value of $31.05, but the market is not treating it like a bargain on earnings today. Chewy trades on a P/E of 34x, compared with 20.4x for the US Specialty Retail industry and a fair ratio of 23.1x. This suggests investors are already paying up for future growth. If earnings stumble or sentiment cools, how much room is there for that premium to compress?

For a closer look at how this earnings multiple compares to peers and what it could mean for valuation risk, See what the numbers say about this price — find out in our valuation breakdown.

Next Steps

Sentiment around Chewy is clearly mixed, with both concern and optimism in the story. It makes sense to look at the details yourself and decide where you stand. To see how those concerns and positives stack up side by side, take a look at the 2 key rewards and 1 important warning sign

Looking for more investment ideas beyond Chewy?

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.