Chewy Stock Down 40% Despite 24% Growth in Free Cash Flow
Written by Emily J. Thompson, Senior Investment Analyst
Updated: 5 days ago
0mins
Source: Yahoo Finance
- Stable Customer Growth: Chewy continues to report steady growth in active customers, with the stock down over 40% year-to-date; however, spending per customer and free cash flow remain stable, demonstrating resilience under its subscription model.
- Subscription Model Advantage: In fiscal 2025, Autoship customer sales accounted for 83% of total revenue, up from 76% two years prior, indicating that this model provides a predictable, recurring revenue stream, with subscriber sales growing 12% last year, outpacing the company's total revenue growth of 6%.
- Improving Profitability: Chewy's adjusted EBITDA margin has improved from 3.3% in fiscal 2023 to 5.7% in 2025, with management guiding for another 100 basis points of margin expansion this year and a long-term target of at least 10%, supported by operating leverage and the expansion of higher-margin private brands.
- Financial Flexibility: With approximately $880 million in net cash and no debt, Chewy can invest in growth initiatives like its vet clinics, and last year, free cash flow grew by 24% to $562 million, with the current valuation at just 12 times this year's earnings estimates, highlighting its attractiveness given the recurring revenue and potential for margin expansion.
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Analyst Views on CHWY
Wall Street analysts forecast CHWY stock price to rise
20 Analyst Rating
17 Buy
3 Hold
0 Sell
Strong Buy
Current: 21.380
Low
42.00
Averages
47.06
High
52.00
Current: 21.380
Low
42.00
Averages
47.06
High
52.00
About CHWY
Chewy, Inc. is an e-commerce business geared toward pet products and services. The Company’s products consist of pet food and treats, pet supplies and pet medications, other pet-health products, and pet services. It serves its customers through its retail websites, and its mobile applications and focuses on delivering customer service, competitive prices, convenience, including Chewy’s Autoship subscription program, and a range of pet food, treats and supplies, and pet healthcare products and services. It partners with approximately 3,200 of the brands in the pet industry, and it creates and offers its own private brands. It owns a number of trademark registrations and applications in the United States and in foreign jurisdictions. These trademarks include American Journey, Blue Box Event, Careplus, Chewy, Chewy.com, Chewy Vet Care, Dr. Lyon’s, Frisco, Goody Box, Onguard, PetMD, PracticeHub, Tiny Tiger, True Acre Farms, Tylee’s, Vibeful, and The Zoo.
About the author
Emily J. Thompson
Emily J. Thompson, a Chartered Financial Analyst (CFA) with 12 years in investment research, graduated with honors from the Wharton School. Specializing in industrial and technology stocks, she provides in-depth analysis for Intellectia’s earnings and market brief reports.
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- Improving Profitability: Chewy's adjusted EBITDA margin has increased from 3.3% in fiscal 2023 to 5.7% in 2025, with management guiding for an additional 100 basis points of margin expansion this year, indicating a strong focus on enhancing profitability.
- Intensifying Market Competition: Chewy faces significant price pressure from competitors like Amazon and Walmart, and a potential price war could further squeeze its margins, presenting a risk that investors need to monitor closely.
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- Intensified Market Competition: As competition in the retail sector intensifies, Walmart's omnichannel upgrades enable it to more effectively respond to challenges from other major retailers, enhancing its market share.
- Shifting Consumer Behavior: With evolving consumer demands for price and convenience, Walmart's omnichannel strategy aims to address these needs, thereby increasing customer loyalty and purchase frequency.
See More
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- Market Strategy Comparison: Unlike Walmart's price competition strategy, Target is focusing on enhancing the high-end in-store experience, attempting to attract consumers through differentiated services, although this may place it at a disadvantage in price competition.
- Omnichannel Capability Reshaping: Walmart's omnichannel capabilities are reshaping how consumers shop, particularly among major retailers, as shoppers increasingly prioritize convenience and delivery options, which could impact Target's market share.
- Investor Attention: Although Target did not make it onto The Motley Fool's list of top stocks, Walmart's ongoing innovation and market adaptability may draw more investor interest in its stock performance.
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See More
Chewy Transitions to Integrated Healthcare Provider
- Subscription Service Growth: Chewy's Autoship subscription service accounted for 83% of total revenue in fiscal 2025, up from 76% two years prior, indicating strong demand for pet food and medications despite overall revenue growth of only 6%.
- Profitability Improvement: The adjusted EBITDA margin increased from 3.3% in fiscal 2023 to 5.7% in 2025, with management guiding for another 100 basis points of margin expansion this year and a long-term target of at least 10%, reflecting the company's efforts to enhance operational efficiency and profitability.
- Market Competition Pressure: While Chewy continues to see growth in active customers and free cash flow, it faces pricing pressures from competitors like Amazon and Walmart, which could further squeeze margins in a price-sensitive consumer market.
- Financial Flexibility: Chewy has approximately $880 million in net cash and no debt, providing financial support for investments in growth areas like vet clinics, with free cash flow increasing by 24% to $562 million last year, demonstrating strong cash generation capabilities.
See More
Chewy Faces Market Pressure Amid Growth Opportunities
- Stable Customer Growth: Despite Chewy's stock price plummeting over 40% year-to-date, the company continues to see growth in active customers and spending per customer, with Autoship sales accounting for 83% of total revenue in fiscal 2025, highlighting the stability and core importance of its subscription model.
- Improving Profitability: Chewy's adjusted EBITDA margin has increased from 3.3% in fiscal 2023 to 5.7% in 2025, with management guiding for an additional 100 basis points of margin expansion this year, indicating a strong focus on enhancing profitability.
- Intensifying Market Competition: Chewy faces significant price pressure from competitors like Amazon and Walmart, and a potential price war could further squeeze its margins, presenting a risk that investors need to monitor closely.
- Strong Financial Flexibility: With approximately $880 million in net cash and no debt, Chewy is well-positioned to invest in growth initiatives such as expanding its vet clinics, and its free cash flow grew by 24% to $562 million last year, reflecting a solid financial foundation.
See More
