Raymond James Sets $28 Price Target, Upgrades Chewy to Outperform at 8x EV/EBITDA
Raymond James upgraded Chewy to Outperform and set a $28 price target, noting the stock trades at 8x EV/EBITDA on 2027 estimates versus its three-year average of 22x. It forecasts 7% revenue growth in fiscal 2026 and EBITDA margin expansion of 80bp to 6.5%, citing pet household formation and pricing flexibility.
1. Upgrade and Price Target
Raymond James upgraded the rating to Outperform and set a $28 price target, reflecting a 10x EV/EBITDA multiple on fiscal 2027 estimates. The upgrade follows a 33% stock decline since the fiscal Q3 report, positioning Chewy below its three-year average valuation.
2. Valuation Reset
Chewy now trades at approximately 8x enterprise value to 2027 EBITDA, compared to a three-year average of 22x, creating an entry opportunity. The firm sees the discounted multiple as justified by slower growth expectations but notes significant recovery potential.
3. Growth Outlook
The firm projects fiscal 2026 revenue growth of around 7% and an EBITDA margin increase of 80 basis points to 6.5%, driven by continued pet household formation and active customer additions. It also anticipates share gains from digital migration and network expansion of veterinary clinics.
4. Margin Expansion and Defensive Profile
Higher gross margin, operating leverage from moderating investment spending and pricing flexibility could further support margins. Chewy’s autoship accounts represent about 83% of revenue while staples categories make up roughly 90% of sales, bolstering its defensive profile.