Bank of America reaffirmed its Buy rating on Chewy Inc. (NYSE:CHWY), reiterating confidence in the online pet retailer despite market concerns that artificial intelligence-powered shopping agents could amplify price competition for commoditized goods.
The stock trades at $25 and has fallen 37.55% over the last six months. Still, InvestingPro analysis lists Chewy among the Most Undervalued stocks at current price levels.
BofA outlines two principal counterarguments to the idea that AI agents will substantially increase price-driven competition. First, AI agents lack the ability to perform purchases in brick-and-mortar stores - a limitation that, if AI shopping adoption broadens, would tend to favor e-commerce penetration rather than depress it. Second, the bank stresses that customers do not make purchase decisions on price alone; factors such as brand loyalty, service quality, delivery speed and convenience continue to shape buying behaviour.
On the operational side, Bank of America points to a number of strengths that support its positive view. Chewy reported $12.58 billion of revenue, representing solid 10% growth, and has remained profitable over the past twelve months. Gross margins are reported at 29.56% and the bank notes growing advertising revenue as an incremental, higher-margin stream.
Subscription dynamics also figure prominently in BofAs assessment. The bank is constructive on rising adoption of the Chewy+ subscription offering and highlights that the recent price increase for Chewy+ allows management to promote the program more broadly as its economics align with the company's core gross margins.
Chewys cost structure is another focal point. The company benefits from fixed-cost leverage driven by increased automation in fulfillment centers and disciplined headcount management, and it is beginning to lap last years investments in fulfillment capacity. These operational levers are cited as contributors to durable margin control.
Advertising is identified as a material long-term opportunity. Chewy is expanding its advertising product suite with a multi-year target of achieving roughly 3% of revenue from advertising, up from about 1% in the prior year. The bank views this shift as a pathway to higher-margin revenue diversification.
Outside of Bank of Americas note, Chewy announced a key finance leadership change. Chris Deppe has been named chief financial officer; Deppe has worked at Chewy since 2022 in roles encompassing supply chain and operations finance and brings over 15 years of experience from Amazon. The CFO appointment follows the companys announcement that chief technology officer Satish Mehta will retire in February 2026, and that a search for his successor is underway.
Several brokerages have adjusted or reiterated ratings on Chewy in recent sessions. Raymond James upgraded the stock to Outperform from Market Perform and assigned a $28.00 price target, citing valuation and the potential for margin improvement and highlighting a favourable enterprise value to EBITDA ratio using 2027 estimates. Piper Sandler kept an Overweight rating with a $48.00 price target, noting concerns about Chewys 2026 guidance and the stocks significant year-to-date underperformance but retaining a constructive stance. Mizuho also reiterated an Outperform rating and maintained a $50.00 price target following the CFO appointment.
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Taken together, the analyst actions and company developments underscore a market balancing near-term execution questions and guidance uncertainty against structural advantages in subscriptions, fulfillment automation and nascent advertising revenue.