Morgan Stanley trims Chewy target as organic growth slows
The bank retained its Overweight rating but said Chewy needs stronger underlying growth and early traction from its redesigned membership programme to support a recovery.
Morgan Stanley has cut its price target for Chewy to US$36 from US$37 while retaining an Overweight rating after the pet retailer’s fiscal 2026 second-quarter results.
Chewy reported net sales of US$3.33 billion, up 7.3% from a year earlier. But organic growth, excluding contributions from the SmartPak and Modern Animal acquisitions, slowed to 5.7% — about 120 basis points below the first quarter.
Morgan Stanley said the reported adjusted EBITDA beat included approximately US$15 million in non-recurring items. While Chewy raised its fiscal 2026 revenue and EBITDA guidance, the firm said adjusted underlying EBITDA guidance was slightly lower at the midpoint.
The bank described the share-price sell-off as excessive given fundamentals were broadly in line, but said a meaningful re-rating would be difficult without positive revisions to organic growth estimates. Its valuation scenarios range from US$14 to US$55, depending on growth, margins, clinic expansion and Chewy+ adoption.
Chewy is expanding its veterinary clinics and higher-margin healthcare services. Morgan Stanley’s modelling also expects Modern Animal and SmartPak to contribute approximately US$100 million and US$80 million respectively to fiscal 2026 revenue.
The redesigned Chewy+ membership programme, expected to launch shortly, is the company-specific catalyst Morgan Stanley identified for the second half of fiscal 2026. Early adoption could support a greater push behind the programme in fiscal 2027, although stronger growth and margin expansion remain prospective.
