Chewy Shares Climb on Upbeat Outlook, but It's Not Too Late to Buy the Stock |

Chewy (CHWY +0.94%) shares climbed after the company issued an upbeat outlook when it reported its fiscal Q4 earnings last week. Despite the gains, the stock of the pet products e-commerce operator is still down nearly 21% in 2026, and the stock looks like it has plenty of room to continue to rebound.

Let’s take a closer look at Chewy’s results and prospects and why the stock looks like a buy.

Custom growth and strong outlook

Chewy’s fiscal Q4 itself was nothing to get too excited about, as the company grew its revenue by just 0.5% year over year to $3.26 billion, matching analyst expectations. Meanwhile, adjusted earnings per share of $0.27 came up a penny short of the consensus estimate.

However, its underlying metrics remained solid. Sales on a normalized 13-week basis were up 8.1%. It saw its active customers climb 4% year over year to 21.3 million, while net sales per active customer rose 2.2% to $591. Sales derived from autoship customers, meanwhile, jumped 4.8% to $2.74 billion and accounted for 84% of its total revenue.

Importantly, margins continued to expand. Its gross margin grew by 90 basis points to 29.4%, while its adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) margins climbed from 3.8% to 5%. This helped lead to a 30.4% increase in adjusted EBITDA to $162.3 million.

Margins are expected to continue to improve this year, with the company guiding for adjusted EBITDA margins to come in between 6.6% and 6.8%, about 100 basis points higher than fiscal 2025. The margin expansion will be led by increased private brand penetration, AI adoption, and the ramp-up of its new fulfillment center in Houston. The company also acquired a small, high-margin equine health business thatit is looking to stabilize, and it continues to see solid momentum with high-margin sponsored ads.

Overall, it is looking for full-year revenue between $13.6 billion and $13.75 billion, representing growth of between 8% and 9%. It projected adjusted EBITDA between $900 million and over $930 million, good for growth of between 20% and 29%. This assumes that the pet industry as a whole sees low-single-digit growth, largely driven by volumes.

A cheap stock with strong operating leverage

What makes Chewy an attractive stock is that the company has a steady, visible business anchored by its autoship customers. That is highly valuable, and these types of companies typically trade at premium valuations because they are great compounding businesses. Meanwhile, Chewy is doing a great job of delivering high-single-digit sales growth and expanding its margins.

Despite that, the stock trades at a forward P/E of just 17 times current-year analyst estimates and 14 times next year’s consensus. That is just way too low for this type of business, and the stock has a lot of upside from here in my view.