Chewy Stock Upgraded to Outperform on ‘Attractive’ Risk/Reward Setup

Chewy's stock (CHWY) is 4.2% higher in the pre-market after Raymond James upgraded the online pet retailer to Outperform from Market Perform, citing compelling valuation following a 33% decline since the company's fiscal third-quarter report.

The firm set a price target of $28, suggesting the recent selloff has created an attractive risk/reward setup for investors willing to look past near-term headwinds.

The upgrade comes at a pivotal moment for Chewy, which has endured a turbulent period marked by insider selling and investor concerns about customer retention. The stock hit a new 52-week low of $23.06 following Chief Technology Officer Satish Mehta's sale of 13,013 shares at an average price of $28.99, totaling approximately $377,247. The transaction, which reduced his direct ownership by 4.54%, raised questions among market participants about internal perspectives on valuation and growth prospects.

Raymond James analysts emphasized that low market expectations coupled with the company's sales and margin opportunities in 2026 present a favorable setup for the stock. The firm's positive stance aligns with a broader pattern of analyst support that has emerged over the past year, despite periodic setbacks. In September 2025, MoffettNathanson upgraded Chewy to Buy with a $48 price target, anticipating more consistent customer additions as pet household formations recovered. That upgrade contributed to a 3.9% increase in the stock price during afternoon trading.

The optimism from Raymond James and other firms contrasts sharply with the challenges Chewy faced following its second-quarter 2025 earnings report in September. While the company met analyst forecasts with $0.33 per share in adjusted earnings and $3.1 billion in sales representing an 8% year-over-year increase, shares fell 12.6% as markets focused on declining GAAP earnings and profit margins. This disconnect between operational performance and market reaction has persisted as a theme for Chewy, with sentiment often overshadowing fundamental progress.

The Raymond James upgrade suggests that after months of volatility and declining share prices, Chewy may be approaching an inflection point where valuation becomes too compelling to ignore.

With Chwy's stock trading near 52-week lows and multiple analysts identifying growth opportunities in healthcare services, private label expansion, and margin improvement, markets appear to be reassessing whether the recent pessimism has created a buying opportunity for patient investors focused on 2026 and beyond.