Raymond James moved Chewy higher in its coverage, raising the e-commerce pet retailer to an Outperform rating from Market Perform. The change follows a steep market correction: Chewy shares have fallen 33% since the company reported results for its fiscal third quarter, a decline that contrasted with a largely unchanged S&P 500 over the same span.
The brokerage highlighted the valuation reset as a central rationale for the upgrade. After the pullback, Chewy is trading at about 8 times enterprise value to its projected 2027 EBITDA, materially below its three-year average multiple of 22 times. Raymond James described that divergence as creating an appealing entry-level valuation and established a $28 price target, which is grounded on roughly a 10 times EV-to-EBITDA multiple applied to fiscal 2027 estimates. That target multiple intentionally sits below historical levels to reflect expectations for slower growth.
On underlying operating assumptions, Raymond James forecasts fiscal 2026 revenue growth of approximately 7% year over year and anticipates an expansion in EBITDA margin of about 80 basis points, bringing margin to an estimated 6.5%, with room for upside. The firm noted that conservative guidance issued by the company has weighed on the stock, yet it also identified multiple drivers that could support a recovery in results and sentiment.
Key growth vectors cited include a steady consumer backdrop into 2026 that could support pet household formation, which the broker says has been running below historical rates. Raymond James also expects active-customer growth to benefit from organic additions, market share gains tied to digital migration and an enlarging network of veterinary clinics. The brokerage underscored that net sales per active customer remains an important lever; it noted that newer customer cohorts typically increase spending over time, that loyalty initiatives are beginning to gain traction, and that the negative impact of a 53rd week in fiscal 2025 will subside.
Pricing flexibility was another area the firm emphasized. Raymond James laid out a scenario in which a 1% to 2% increase in industry pricing in fiscal 2026 would allow Chewy either to raise its own prices or emphasize value to win share, and said that either path would support revenue. On margins, the firm expects improvement driven by higher gross margin and operating leverage as the elevated investment spending recorded in fiscal 2025 moderates.
The brokerage also pointed to elements of Chewy’s business that it considers defensive. Autoship orders account for roughly 83% of revenue, and staple categories such as consumables and healthcare represent about 90% of annual sales, characteristics that Raymond James says provide downside protection in a weaker environment.
The firm reiterated Chewy’s market position as the largest pure-play pet e-commerce retailer in the United States, operating with more than 1,600 brands and expanding initiatives into healthcare and international markets. In setting its outlook and valuation, Raymond James applied conservative assumptions on growth while assigning a discounted multiple to reflect that slower trajectory.
Summary
Raymond James upgraded Chewy to Outperform after the stock declined 33% since fiscal third quarter results. The brokerage argues the pullback reduced the company’s EV-to-2027-EBITDA multiple to about 8 times, below a three-year average of 22 times, and established a $28 price target based on roughly 10 times EV/EBITDA on fiscal 2027 estimates. The firm projects fiscal 2026 revenue growth of about 7% and an EBITDA margin of roughly 6.5% as investment spending eases.
Key points
- Raymond James upgraded Chewy to Outperform and set a $28 price target, citing a valuation reset and potential upside from revenue and margin improvements - sectors impacted: consumer retail, e-commerce, pet care.
- The brokerage models roughly 7% revenue growth in fiscal 2026 and an EBITDA margin expansion of about 80 basis points to 6.5%, with improves tied to gross margin and operating leverage.
- Defensive revenue characteristics include autoship representing about 83% of revenue and staples categories making up roughly 90% of annual sales, which the firm says provide resilience in downturns.
Risks and uncertainties
- Conservative guidance from the company has pressured the shares and remains a near-term risk to sentiment and performance - impacts consumer and equity markets.
- Timing effects such as the drag from a 53rd week in fiscal 2025 could continue to complicate year-over-year comparisons and performance metrics - impacts financial reporting and retail revenue trends.
- Slower growth expectations are embedded in the discounted valuation multiple used by the firm; if growth weakens further relative to these assumptions, the valuation rationale may be undermined - impacts investor returns and retail sector valuations.
Note: This article reports Raymond James’s published views on Chewy and its modeling assumptions, including the upgrade to Outperform, the $28 price target and the firm’s fiscal 2026 and 2027 projections.