Shares of retailer Chewy first fell, then soared after the report. Are they worth buying?

Pet supplies retailer Chewy gave a fourth-quarter earnings forecast that came in below Wall Street's expectations. This initially caused a drop in the company's stock prices, but they quickly recovered and jumped by almost 8%: the management managed to dispel fears a bit. Analysts warn of risks: they are worried, for example, about competition and the impact of import duties. But the consensus rating suggests a "buy" advice.

Chewy expects its adjusted earnings per share for the fourth, current quarter to be in the range of 24 cents to 27 cents. The average analyst forecast cited by Bloomberg was 29 cents. The forecast for net sales - $3.24 billion to $3.26 billion - was also slightly below Wall Street's estimate, Barron's wrote.

Shares of Chewy fell sharply in the premarket after the report was published: quotes were losing 7.6% of their value at the moment, but then they recovered the losses and began to appreciate by about the same amount during the conference call, where the management shared the details of the forecast, Bloomberg noted. The stock initially soared 7.2% in major trading, but then the pace of gains slowed to about +1.5%.

Chewy reported earnings of 32 cents per share for the third quarter ended Nov. 2, 2025, beating analysts' consensus forecast of 30 cents, Barron's wrote. Revenue rose 8.3% year-over-year to $3.12 billion: in line with Wall Street expectations, The Wall Street Journal noted. Revenue from Autoship, a service that lets you automatically arrange regular deliveries of pet supplies, rose about 14% to $2.6 billion.

The company's results suggest that even shoppers on a tight budget remain committed to caring for their pets and are choosing Chewy's services, including Autoship subscriptions and telemedicine, according to Bloomberg.

"Two key takeaways for us are a more pronounced turnaround in customer growth momentum (plus 250,000 sequentially versus 150,000 last quarter), and gross margins in line with expectations, although we anticipated some volatility following the launch of the loyalty program," William Blair analyst Dylan Carden said in a Bloomberg statement.

In early December, UBS lowered its target price on Chewy shares from $43 to $41, maintaining a neutral rating. Its target implies a 17% increase in the stock relative to the close of trading on December 9. UBS analysts noted that the potential for gross margin expansion remains limited: despite the contribution of advertising initiatives to its improvement, further growth will be more difficult to ensure, writes Yahoo Finance. Against this backdrop, the bearish arguments are intensifying - competition in the market is increasing, the impact of duties is squeezing costs, and the expansion of promotional activity in the second half of the year is also constraining margin improvement opportunities, UBS added.

Nevertheless, analysts are generally positive on the retailer's stock. Of the 27 analysts who have assigned ratings to Chewy's shares, 19 advise "buy" them, while the remaining eight recommend "hold," MarketWatch shows.

This article was AI-translated and verified by a human editor