Investing in online pet retailer Chewy (CHWY 4.18%) has been a rough ride in recent years. The one-time pandemic darling experienced a reversal of fortune in the 2022 bear market, and the stock has traded in a narrow range since then.
However, business conditions have become increasingly favorable for the company, and it continues to develop new revenue streams. Could those changes make 2026 the year that Chewy stock finally recovers?
Let's take a closer look.
Image source: Getty Images.
Where Chewy stands today
Chewy competes with larger online retailers like Amazon, as one might expect. Chewy combines low prices, fast shipping, supplier relationships, and data analytics to offer desired products rapidly at competitive prices.
Still, what has made it stand out is excellent customer service, something not found with many other e-retailers. Such service has fostered customer loyalty and likely enhanced the popularity of its Autoship service. Autoship delivers consumable products to customers periodically, providing the company with a steady revenue stream.
Additionally, Chewy has ventured beyond traditional retailing to boost revenue. Among these additional sources are pet insurance, telehealth services, and pharmaceutical products.
Improving financials
If the financials are any indication, its efforts are succeeding. In the first nine months of fiscal 2025 (ended Nov. 2), Chewy reported more than $9.3 billion in net sales, an 8% increase from the same period in fiscal 2024.
Costs and expenses grew at a slightly slower pace than revenue. Still, Chewy received a $216 million income tax benefit in 2024. That meant the net income of $184 million in the first three quarters of 2025 was far below the $371 million earned in the same year-ago period.
It also seems to hide Chewy's financial progress and may partially explain why the stock has risen by only about 5% so far this year. The supposed "reduction" in net income temporarily took the price-to-earnings (P/E) ratio to 100.
NYSE: CHWY
Key Data Points
However, even when not accounting for tax benefits, Chewy's profits grew significantly. The forward P/E ratio, which does not include any one-time benefits, is at about 28. While not cheap, it is slightly below the S&P 500 average P/E of 31.
Analysts forecast an 8% revenue increase in fiscal 2027. As investors become more aware of such improvements, it increases the likelihood that Chewy stock could experience a recovery in 2026.
Chewy in 2026
Chewy's efforts to foster new revenue sources have put the company in a growth mode, possibly enough that investors could renew their interest in the stock in 2026.
Indeed, investors may have forgotten about Chewy stock after its drop in 2022. Nonetheless, the company's efforts to build new revenue streams have put Chewy's financials on a growth track, and that expansion is on track to continue.
Its improvements have not yet been priced into Chewy stock. However, the company has prospects for improved revenue and profit growth. With its valuation set to fall closer to market averages, the likelihood of a 2026 recovery in Chewy stock is rising.
