Chewy’s September Pullback: Is It Your Time to Buy?

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Written by Thomas Hughes on September 11, 2025

Key Points

Chewy is well-positioned to continue growing, driving cash flow, and buying back shares.
Analysts trimmed targets after the Q2 release, but the action narrowed the range around the consensus, forecasting a 25% upside.
Chewy’s stock price floor is likely to be solid due to institutional trends.

Chewy’s (NYSE: CHWY) stock price pulled back unexpectedly following the Q2 earnings release, opening a buying opportunity that should not be ignored.

The company’s results and guidance were tepid relative to the analysts’ consensus forecasts, but are no less strong because of it.

Chewy is at the top end of its guidance, outperforming its peers, and driving cash flow sufficient to execute its strategy while buying back shares.

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Autoship Sales Anchor Growth and Stability

Among the critical details in the report is the strength of Autoship sales, which underpin the company’s growth and cash flow outlook due to its high visibility. Autoship sales tend to run in retail categories like food and medicines, which are needed regularly, month after month and provide better margins.

This foundation allows Chewy to weather short-term volatility and positions it for sustainable long-term growth. The recent quarter saw a 4.5% increase in active customers, adding further support to the company’s recurring revenue base.

Analyst Reactions Are Cautious, But Bullish Sentiment Remains

The analysts’ response to the news was to cut price targets. MarketBeat tracked nearly a dozen reports within the first 24 hours, and 100% included price target reductions. However, the market overreacted because the report’s takeaways were bullish.

The Moderate Buy consensus rating remains unchanged as of mid-September, while the price target reductions have simply narrowed the range around the consensus. MarketBeat’s consensus price target implies at least 25% upside from current levels, highlighting the disconnect between analyst models and current market pricing.

Institutional Investors Still Hold Over 90% of Shares

One of the strongest signals of confidence comes from institutional investors. Despite some selling in 2025, institutions still control over 90% of Chewy’s shares. Notably, there was a spike in institutional buying during Q2 as the share price fell, which suggests that professional investors see value at these levels.

The short interest increased over the summer, adding downward pressure on the market. It remains relatively low at just 4% of the float, minimizing the risk of further downward pressure and increasing the likelihood of a short-covering rebound.

Chewy’s Solid Quarter Overshadowed by High Expectations

Despite falling short of expectations, Chewy had a solid quarter in Q2.

The company’s revenue grew by 8.6% to $3.1 billion. Autship sales, compounded by a 4.5% customer increase, drove the gains and are central to the market’s disappointment; it was looking for more robust growth.

The margin news is equally encouraging. Chewy widened its gross margin and controlled costs, resulting in an 80 bps increase in the adjusted EBITDA margin and leveraged earnings gains.

The adjusted net income increased by 35% to $141.1 million, leaving the adjusted earnings per share at $0.33, 37% above last year’s. The company expects its strengths to continue into the current quarter and has raised guidance accordingly.

The issue is that Chewy has aligned with market expectations and failed to catalyze buying.

However, its balance sheet clearly provides an incentive for buyers. Cash flow has been robust enough to fund internal investment and reduce the share count by over 2%, while equity has grown nearly 50% YOY with additional gains expected by year’s end.

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CHWY May Have Already Hit Bottom

There is a risk that Chewy’s stock price could extend its September decline below the critical support target of $35, but it is minimal. The $35 level aligns with prior support and institutional trends, making it a likely bottom for the market.

The question is how quickly the market could rebound; the answer is that it depends. Macroeconomic conditions, including the FOMC interest rate policy, could change, spurring the entire market into rebound and rally mode.

On the other hand, Chewy’s market could wallow at current levels until the subsequent earnings report or later before regaining bullish traction.

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