Chewy Stock Just Flashed a Major Buy Signal for 2026

Key Points

• Chewy is growing faster than its competitors, taking market share, and improving its operational quality.
• Free cash flow is present and growing, allowing for share buybacks that substantially reduce the count.
• Analysts and institutions are accumulating this stock in late 2025, providing a tailwind likely to continue in 2026.

Chewy’s NYSE: CHWY fiscal year 2026 (FY2026) Q3 results highlight why it is a good buy to hold in 2026. The company is outperforming expectations and lifting guidance amid a business growth spurt and improving operational quality. Operational quality is a critical factor as Chewy produces profits, has free cash flow, and buys back shares. The Q3 activity aided a 1.6% year-to-date (YTD) reduction in share count, and the aggressive pace is expected to continue in the upcoming quarters. What is also likely is that this company will continue to perform at the high end of its industry, take market share, improve its quality, and drive its share price higher. 

The technical outlook in mid-December is favorable. The Q3 release triggered a mild after-hours sell-off, but it was a knee-jerk reaction to soft guidance that was later viewed as cautious. The critical detail is that after-hours weakness turned to strength in the open session, with the stock price advancing more than 4% quickly after the bell. The takeaway is that this market is a little skittish, but has solid support at the cluster of moving averages, aligning with a market reversal that began in 2024. The likely outcome is that CHWY stock will continue to advance over the coming weeks, months, and quarters, potentially setting a fresh long-term high by mid-year 2026. 

CHWY's Downside Is Limited by Analysts’ and Institutions’ Strong Support

The analysts' and institutional activity align with the bullish stock price outlook. The Q4 guidance update did not trigger any price target or sentiment upgrades, but neither did it trigger any reductions. The post-release activity on the day after the release includes several reaffirmed ratings and price targets, which affirm the bullish trend. 

The bullish analysts’ trend includes increased coverage and firmer sentiment than in the previous year, a solid Moderate Buy rating from 25 analysts, and an upward price target trend. The price target is a critical factor, implying a 45% upside and potential to reach long-term highs. At approximately $47, the mid-December consensus is 11% short of the highs, an easy move, assuming that upcoming reports continue the existing business trends. 

The institutions own more than 90% of CHWY stock and has been contributing to market volatility. However, selling in Q3 is offset by a shift to buying in Q4 and a generally bullish stance for the year. The data tracked by MarketBeat shows that institutions accumulated CHWY stock at a pace of $3 bought for each $1 sold, providing solid support, as indicated by the price action. 

Chewy’s Strong Q3 Suggests Q4 Guidance Is Overly Cautious

Chewy had a great Q3 with revenue growing by 8.3% and outpacing MarketBeat’s consensus estimate. The strength was driven by a 4.9% increase in active customers and revenue per customer, with the all-important autoship segment leading the way. Autoship is critical as it provides a visible revenue stream that grew by 13.6% year-over-year, accounting for 83.9% of revenue, up 390 basis points from last year. 

Margin news is also good. The company’s top-line strength, operational quality, and improving customer quality drove margin gains at all levels. The results include a 180-basis-point improvement in net margin, a 100-basis-point improvement in adjusted EBITDA margin, and a 59% increase in adjusted net income. Other critical factors include the free cash flow, which grew at an accelerated 16% pace compared to the top line. 

As for guidance, it isn’t bad, just in alignment with consensus figures, which have trended higher over the past few months. In this light, it is slightly below expectations, which were for outperformance. Either way, the company is growing faster than its competitors and driving value for its investors. Equity, a measure of shareholder value, increased by 80% YTD at the end of Q3.