Chewy Inc. Poised for Strong Fourth Quarter: TD Cowen’s Analysis
TD Cowen has reiterated its Buy rating and set a price target of $39 for Chewy Inc. (NYSE: CHWY), signaling strong confidence in the pet e-commerce giant ahead of its fourth-quarter earnings release for 2025. As the pet industry continues to flourish, Chewy’s business model and growth strategies appear to put the company in an advantageous position.
Projected Revenue Growth
TD Cowen projects Chewy will report fourth-quarter revenue of $3.27 billion, reflecting a 0.7% year-over-year increase. This forecast aligns closely with consensus estimates and sits at the upper end of the company’s guidance. The anticipated revenue growth is attributed to a rise in both active customers and net sales per active customer (NSPAC), underscoring Chewy’s ability to attract and retain customers in a competitive marketplace.
Improved Gross Margins
The firm forecasts a gross margin of 29.3% for the fourth quarter, up from 28.5% during the same period last year. This improvement is expected to be driven by several factors, including:
- Higher Advertising Revenue: Chewy’s investments in advertising are starting to yield returns, helping to boost overall margins.
- Growth in First-Party Brands: The expansion of Chewy’s proprietary brands has contributed to higher margins as these products often command better pricing.
- Rising Average Selling Prices: With increased demand for premium pet products, Chewy has been able to raise prices without deterring consumers.
EBITDA and Market Performance
TD Cowen estimates that Chewy will achieve an EBITDA of $158 million, representing a significant 26.9% year-over-year increase. However, this forecast is approximately 2% below consensus expectations. Analysts will be closely watching how these numbers play out when Chewy reports its quarterly results on March 25, before market opening.
Despite the positive outlook, Chewy’s stock has faced volatility, having declined 29% year-to-date compared to a 4% decline for the S&P 500. Since the third-quarter earnings report on December 10, shares have fallen approximately 32%. This trend highlights the challenges that Chewy faces in a fluctuating market environment.
Valuation and Future Growth Potential
Currently, Chewy is trading at around 10.0x enterprise value to EBITDA based on 2026 estimates, which TD Cowen regards as an attractive valuation. The company is projected to achieve an 18% compound annual growth rate in EBITDA from 2026 through 2031. This growth potential is essential as investors consider the long-term viability of Chewy in the evolving e-commerce landscape.
Resilience in a Competitive Market
TD Cowen also pointed out Chewy’s resilience against potential tariff impacts and recessionary pressures, particularly when compared to other e-commerce platforms. The pet industry has shown robust growth trends, and Chewy’s strategic positioning allows it to navigate economic fluctuations effectively.
Conclusion
In summary, Chewy Inc. appears to be on track for solid fourth-quarter results, driven by a combination of increased customer engagement, improving margins, and a favorable market environment. With TD Cowen maintaining a bullish outlook, investors may find Chewy an enticing prospect in the retail sector, particularly within the pet industry.
