Chewy (NYSE:CHWY) has been downgraded to ‘Hold’ from ‘Buy’ by analysts at Jefferies due to valuation concerns after a run-up in the pet retailer's stock.
Chewy shares have surged by 41% in the year-to-date, now trading at 24 times projected 2026 earnings before interest, taxes, depreciation and amortization (EBITDA), roughly one standard deviation above historical averages.
According to Jefferies, this premium valuation already prices in a high level of execution and a potential first quarter beat and raise, which analysts see as unlikely in the current macro environment.
“We see limited upside to numbers beyond the high-end of the guide at this point,” they wrote in a note.
Jefferies notes that the broader pet spending environment remains stable but lacks the strength to drive significant earnings surprises.
US personal consumption data for April showed only modest growth in pet-related spending, up about 3.5%, which analysts believe made some consumers more hesitant to try a more premium product, also weighing on adoptions.
Notably, Chewy's digital footprint is expanding, with third-party data showing increases in web traffic (+4% year-over-year), app downloads (+24%), and app users (+7.6%).
These metrics point to ongoing execution and potential share gains, but Jefferies believes these positives are already reflected in the stock price.
The firm raised its 2025 revenue forecast slightly to $12.44 billion, near the top of Chewy’s guidance range, and lifted its EBITDA estimate to $700 million from $687 million.
For 2026, Jefferies projects $13.1 billion in revenue and $824 million in EBITDA.
The analysts also upped their price target to $43 from $41, which implies a downside of about 9% from Chewy’s share price at the time of writing.
The $43 price target is based on 20 times Jefferies' 2027 EBITDA estimate of $929 million, reflecting a more balanced risk-reward profile at current levels.
“The pet ecommerce retailer is delivering better earnings due to supply chain efficiencies, sponsored ads ramping, and pet health uptake,” analysts wrote.
“Pet industry normalization alongside better digital marketing ROI should translate to share gains and accelerate customer spend. But valuation keeps us on the sidelines.”