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Wondering Why Chewy Fell 51%? Here's What The Bears Saw

Simply Wall St · 2d ago

If you had backed the bullish case that Chewy’s digital subscriptions, Autoship, and emerging vet services would steadily compound value, the share price outcome would have felt very different to the story. Holding Chewy over the past year would have meant a 50.9% loss, including dividends. If that decision sat on those 2025 assumptions about autoship-driven loyalty, vet care expansion, and premiumization, what crucial risk or limitation did that original thesis fail to account for?

The useful thing about a Narrative is that the reasoning is checkable: the assumptions sit beside the argument, and together they imply an estimated Fair Value you can disagree with.

The easy part of this move is behind Chewy. Zero in on 29 high quality undervalued stocks for companies trading below our estimates.

The Two Chewy Stories Investors Were Weighing

Chewy shares cost US$39.12 at the start of the period, and investors were effectively choosing between two very different stories about how digital pet care might play out.

The bullish narrative put fair value at US$52, assuming Chewy Vet Care and ad platforms could become high margin engines, with revenue growth assumptions of 11.6% a year and profit margins holding at 3.2%.

The bearish view anchored fair value at US$33, warning that flat pet adoption trends and substantial marketing spend could limit active customer growth and leave margins closer to 2.7%.

NYSE:CHWY 1-Year Stock Price Chart
NYSE:CHWY 1-Year Stock Price Chart

What The Chewy Evidence Actually Showed

Chewy’s reported Q2 2027 numbers gave bulls something concrete. Revenue reached US$3.33b and net income rose to US$80.5m, lifting net margin from 2.0% to 2.4%. That backed the profitability side of the optimistic story about Autoship and vet services, although lowered 2026 sales guidance and weaker consumer demand kept the cautious case alive. Overall, the evidence cut both ways.

The useful lesson is about which claim to test. When a thesis leans on high margin ecosystems, it can be helpful to watch net income and net margin side by side with any guidance resets rather than just tracking subscriber counts or new product headlines.

What Chewy’s Lower Price Now Asks You To Believe

Chewy now trades at US$18.95, with the selected Narrative suggesting its Fair Value sits above that level. The focus is on whether Autoship, Chewy Vet Care and automation can turn today’s lower price into a long runway for recurring, higher margin revenue.

That means the fall over the past year only looks like an opportunity if you think Chewy can turn its Autoship base and growing clinic footprint into a durable, higher margin health and services ecosystem supported by AI driven cost savings.

"The main thing that has to go right is that Chewy converts its Autoship base and Vet Care clinics into a durable, higher margin health and services ecosystem supported by automation, AI and sponsored ads."

That disagreement has a full argument behind it. → Uncover the higher Fair Value this Narrative argues for

Go Straight To The Source

Passing on this one could have spared you a loss. Where might you find the opposite surprise? Start looking for companies whose prices leave room for a better outcome than investors expect. These three trade below our estimated value.

  • Company 1 - 46% below our estimate - targets digital payment users migrating from cash using proprietary transaction technology.
  • Company 2 - 33% below our estimate - converts subsea project leads into integrated engineering work and maintenance service agreements.
  • Company 3 - 27% below our estimate - sells GPU-based platforms that support training and deployment of advanced AI models.

Those are three of them. See every one of the 25 solid balance sheet companies →

This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.