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J.P. Morgan on Chewy: Macro Headwinds Cap Growth — Neutral, $24 PT

Posted on by Eben@CANSLIM Research
Eben@CANSLIM Research's avatarEben@CANSLIM Research

J.P. Morgan downgraded Chewy (NYSE: CHWY) to Neutral from Overweight and cut its price target to $24 from $29, citing a challenged pet-industry backdrop and muted organic growth. The call follows Chewy’s second-quarter FY26 results, after which the shares fell -9% versus a -1% move in the S&P 500. J.P. Morgan still credits Chewy with market-share gains, healthy customer metrics and expanding profitability, but argues the macro drag now limits the upside case.

Key Takeaways

  • J.P. Morgan moved Chewy (CHWY) to Neutral from Overweight, setting a December 2027 price target of $24, down from a prior $29 for December 2026.
  • Chewy shares fell -9% post-earnings against a -1% decline in the S&P 500, with the stock down -36.2% year-to-date and -40.0% over 12 months on an absolute basis.
  • Chewy’s 2QFY26 net sales of $3,330M beat J.P. Morgan’s $3,311M estimate by 0.6%, while adjusted EBITDA of $227M (a 6.8% margin) beat the $210M estimate by 7.8%.
  • Chewy raised its full-year FY26 net sales outlook by roughly $40M at the midpoint, and J.P. Morgan lifted its FY26 adjusted EPS estimate to $1.55 from $1.52 and FY27 to $1.92 from $1.84.
  • Chewy repurchased $200M of shares in 2QFY26 and expects AI-related initiatives to deliver low tens of millions of dollars in FY26 cost savings, scaling to about $50M annualised in FY27.

What J.P. Morgan’s Downgrade of Chewy Means for CHWY

In a report titled “Continued Macro Headwinds Curb Organic Growth, But Executing on What It Can Control; Moving to Neutral w/ $24 PT,” J.P. Morgan analyst Margaret Hoffman argues that Chewy Inc. (CHWY) continues to execute on the levers it controls, but that a soft consumer backdrop and muted organic growth no longer justify an Overweight stance. The analyst notes the consumer environment did not deteriorate further relative to trends exiting 1QFY, but also did not meaningfully recover, with continued pressure on discretionary attachment and premiumisation during 2Q.

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