JPMorgan Downgrades Chewy to Neutral Amid Soft Pet Spending
JPMorgan downgraded Chewy Inc.'s (CHWY) stock to Neutral from Overweight, citing stubborn macroeconomic pressure on organic growth. Despite acknowledging Chewy's market share gains and strong execution of its initiatives, JPMorgan analyst Doug Anmuth noted muted organic growth in discretionary and premium purchases.
Anmuth set a price target of $24 for Chewy, based on seven times his 2028 adjusted EBITDA estimate of $1.2 billion. The analyst remains positive on Chewy's market share gains, profitability, and capital returns, but the subdued organic growth outlook prompted the downgrade.
Chewy recently acquired SmartPak and Modern Animal, both of which beat expectations, and raised its full-year sales outlook by about $40 million at the midpoint. The company also saw a second-quarter adjusted EBITDA margin of 6.8%, above guidance, with underlying margins improving due to sponsored ads, fulfillment efficiency, and AI productivity gains.