Chewy (CHWY 1.92%), a native to the online pet retailer space, is under heavy pressure today. Specifically, the e-commerce company's shares fell by as much as 6.51% in pre-market trading Thursday morning. 

What's weighing on Chewy's stock? After the closing bell Wednesday, Chewy reported fiscal fourth-quarter and full-year 2022 financial results. Although the e-commerce company posted an impressive 13.4% increase in year-over-year net sales to $2.71 billion, investors appear to be concerned about two key issues in yesterday's earnings release:

  1. Chewy reportedly saw a 1.2% decline in active customers to 20.41 million over the preceding 364-day period. Wall Street analysts, by contrast, expected the company to hold on to roughly 20.5 million active users over this period. 
  2. The company reaffirmed its plans to move forward with its international expansion in yesterday's earnings presentation. While this strategy holds enormous upside potential for the online pet retailer, it also comes with a fair amount of risk. Speaking to this point, several top-tier retailers like Walmart, Target, and eBay have all notched major failures on the international stage.   

Should investors buy Chewy stock on this dip? Let's dig deeper to find out. 

A pet owner and a dog on a couch.

Image source: Getty Images.

Chewy's long-term value proposition remains intact

Chewy stock is an outstanding buy-and-hold play for three overarching reasons:

  1. The company's dedicated customer service reps have helped it build a highly loyal and engaged customer base. Underscoring this point, Chewy noted in its latest financial release that net sales per active customer grew by a healthy 15.1% to $495 in the fourth quarter of 2022, relative to the same period a year ago. 
  2. Chewy's subscription-based model sports a whopping 73% autoship rate, which is among the very best in the industry. In short, customers are steadily returning to Chewy for their everyday pet consumables and medications. 
  3. The online pet retailer space is projected to grow at a compound annual growth rate of 11.5% over the next four years, according to a report by Grand View Research. As a leader in this area, Chewy stands to benefit from this high level of marketwide growth. Keeping with this theme, Wall Street expects the company's top line to rise by a noteworthy 23.7% over the next 24 months. That's a solid growth rate by any measure, especially in a fiscally challenging environment. 

Is Chewy stock a table-pounding buy on this dip?

Before this pullback, Chewy's shares were already significantly undervalued, according to the bulk of analysts covering the stock. Although a small contingent of analysts have indeed lowered their 12-month price targets on this pet e-commerce stock in the wake of yesterday's earnings release, Chewy's shares are still trading well below most analysts' forecasts -- with the sole exception being Deutsche Bank's rather bearish call of $35 per share (implied downside of 7.3% relative to Wednesday's closing price).

Bottom line, the market appears to be overreacting to Chewy's modest loss of active users and its international expansion plans. Bargain hunters, in turn, may want to take advantage of this weakness in the online pet retailer's shares.