Is Chewy Stock Still a Buy After Gaining 16% in the Past 3 Months?

Core Viewpoint - Chewy Inc. has experienced a significant stock rally of 16% over the past three months, driven by strong financial performance, increasing consumer demand, and operational efficiencies, outpacing the industry average rise of 10.8% [1] Financial Performance - Chewy's stock closed at $37.55, which is 6.3$40.09, but it is trading above its 50 and 200-day moving averages, indicating a bullish trend [4] - The company's Autoship program generated $2.3 billion in sales in Q3 of fiscal 2024, reflecting an 8.7$567 [8] Market Position and Growth Opportunities - Chewy has established a strong presence in the online pet retail sector through innovation and customer loyalty, with a growing portfolio that includes veterinary and pharmacy services [6] - The entry into the veterinary services market through Chewy Vet Care provides access to a $25 billion total addressable market, with six veterinary clinics operational by Q3 [9] Challenges and Competitive Landscape - Despite a promising growth trajectory, Chewy faces potential challenges such as slowing growth, customer acquisition saturation, and rising cost pressures [10] - The adjusted EBITDA margin expanded to 4.8% in Q3, but guidance for Q4 indicates a decline to 3.4% due to increased seasonal marketing costs [11] - Chewy operates in a price-sensitive market with competitors quickly adjusting pricing strategies, and inflationary pressures in logistics, labor, and raw materials could impact margins [12] Valuation Concerns - Chewy is currently trading at a forward 12-month price-to-earnings (P/E) multiple of 29.98X, which is a premium compared to the industry average of 24.74X, indicating that investors may be paying a high price relative to expected earnings growth [14] Investment Outlook - Chewy's stock rally reflects solid fundamentals and strong customer engagement, but competitive pressures, rising costs, and premium valuation may limit near-term upside [16]