Chewy Gains As Stock Upgraded: Earnings Approach, Risk/Reward Profile Improves

Chewy Inc. (CHWY) is seeing renewed optimism as Mizuho upgrades the stock to Outperform, citing an attractive risk/reward profile following a recent selloff.

The positive sentiment comes ahead of the company's upcoming earnings report this week, and has CHWY trading 3% higher into today's opening bell.

The upgrade by Mizuho analyst David Bellinger includes a price target increase to $50 from $44. Bellinger suggests the recent market activity has created a favorable entry point for investors. This perspective contrasts with a prior downgrade in June 2025, where Mizuho shifted to Neutral, advising caution after a significant 55% rally since April, despite raising the price target to $47. The current upgrade thus signifies a shift in sentiment driven by recent market corrections.

Mizuho anticipates Chewy's upcoming earnings report and fiscal 2025 outlook to be strong, potentially easing investor concerns that arose earlier in the year. Key factors supporting this positive outlook include robust customer growth, with net additions exceeding 100,000 per quarter, and an expected improvement in core margins as initial auto-ship discounts become less impactful.

This expectation builds on observations from January 2025, when Mizuho highlighted Chewy's successful transition to an in-house advertising platform. This move is anticipated to reduce costs and enhance vendor services, with retail media revenue projected to grow from approximately 1% to 3% of total revenue in the coming years.

Looking ahead, the market will be closely watching Chewy's earnings report for confirmation of these positive trends. Revenue growth is projected to reach 4.5% in fiscal 2025, accelerating to 8.1% by fiscal 2027, with adjusted EBITDA margins reaching 7.2% in the same period. These projections, initially highlighted in January 2025, suggest sustained growth and improved profitability.

The upgrade reflects a renewed belief in Chewy's fundamentals and growth prospects, making the stock an interesting prospect for those seeking exposure to the online pet retail market. Upcoming earnings could prove pivotal in shaping the next leg, and this week is likely to be volatile.