### The Resilient Pet Industry

The pet industry in the United States is a robust market, with the companion animal sector expected to grow by an impressive 8.2% annually from 2018 to 2025. This growth is fueled by the deep emotional bonds people share with their pets—whether they are furry, feathery, or scaly. As pet ownership rises, so does the demand for products and services tailored to these beloved companions. In this thriving landscape, Chewy (NYSE: CHWY) emerged as a key player in the e-commerce sector focused on pet supplies.

However, despite operating in such a lucrative market, Chewy’s stock has faced dramatic volatility. Once soaring, it has now sunk to nearly 80% below its all-time high in 2021. This article delves into the complexities of Chewy’s business, the factors contributing to its stock decline, and why it might still be worth considering for long-term investors.

### A Brief Overview of Chewy’s Journey

Founded in 2011 and publicly traded since 2019, Chewy quickly established itself as a go-to destination for pet products online. With a business model centered around convenience and customer service, Chewy has created a strong ecosystem for pet owners. From pet food to medications, customers can easily order what they need with just a few clicks.

However, the stock’s trajectory took a dramatic turn. At its peak, Chewy’s shares traded at a staggering seven times its sales—a valuation that left investors questioning whether it could sustain such lofty heights. As the market corrected and the bubble burst, Chewy’s stock price followed suit, prompting a reevaluation of its worth.

### The Bubble Bursts: Market Dynamics at Play

Understanding Chewy’s stock decline requires context about the broader market environment in which it thrived. The 2020-2021 period saw a surge in tech and e-commerce stocks, driven by the pandemic and an influx of retail investors. Many companies, including Chewy, experienced inflated valuations that were not aligned with their underlying financial performance.

When the market began to correct itself, many high-flying stocks, including Chewy, faced significant sell-offs. The company’s stock price fell, reflecting a more rational assessment of its valuation, yet it also created an opportunity for discerning investors.

### Chewy’s Business Performance: A Strong Foundation

Despite the stock’s tumultuous journey, Chewy’s operational metrics tell a different story. The company has shown remarkable resilience in its business performance. Over the trailing 12 months, Chewy has seen its sales more than double, reaching $12.6 billion. Additionally, the company generated $487 million in free cash flow, a sign of healthy financial management.

The key to Chewy’s success lies in its customer-centric approach. As of the end of the third quarter of 2025, Chewy boasted over 21 million active customers—an increase of 4.9% compared to the previous year. This growth is particularly noteworthy given the competitive landscape dominated by giants like Walmart and Amazon.

#### Customer Retention is Key

One of Chewy’s standout features is its autoship service, which has become increasingly popular among pet owners. Approximately 84% of Chewy’s net sales stem from these recurring orders, ensuring that customers receive their pet essentials without the hassle of reordering. This business model not only fosters customer loyalty but also establishes a reliable revenue stream for Chewy.

### Chewy’s Competitive Landscape

While Chewy is undoubtedly a leader in the pet e-commerce space, it faces fierce competition from larger retailers that offer similar products. Companies like Walmart and Amazon have the resources to undercut prices, which can pressure Chewy’s market share.

However, Chewy’s unique selling proposition lies in its specialization and customer service. The company’s platform is designed not just for sales but also for community engagement, with a wealth of educational resources for pet owners, personalized recommendations, and exceptional customer support.

### Analyzing the Valuation: Is Now the Time to Buy?

Currently, Chewy’s stock trades at just over 15 times full-year 2025 earnings estimates. Analysts predict an average earnings growth rate of around 18% over the next three to five years. This valuation, particularly after an 80% decline, could present a compelling entry point for investors looking for growth opportunities in a recovering market.

When considering Chewy as a potential investment, it’s crucial to weigh the risks associated with its competitive landscape against its strong business fundamentals. The company’s ability to adapt to market changes and retain customers will significantly influence its future performance.

### The Bigger Picture: Implications for Investors

Investing in Chewy at this juncture requires a balanced perspective. While the stock has faced significant declines, the underlying business remains strong, backed by solid revenue growth and customer retention strategies.

Investors should also consider the broader implications of market trends in e-commerce and the pet industry. As pet ownership continues to rise and consumer behavior shifts toward online shopping, companies like Chewy that focus on customer experience and convenience may be well-positioned for growth.

### Conclusion: Should You Buy Chewy Now?

Before making any investment decisions, it’s essential to conduct thorough research. Chewy may not be featured on every investment shortlist, but its strong fundamentals and market potential make it a noteworthy option for long-term investors willing to ride out market fluctuations.

With a diversified customer base and a strong revenue model, Chewy could be a diamond in the rough for investors looking to capitalize on the pet industry’s growth. As always, potential investors should remain vigilant, monitor market trends, and evaluate their risk tolerance before diving into any stock purchase.

In summary, while Chewy’s stock has undergone a significant decline, its business remains robust, and the pet industry continues to thrive. For investors seeking a growth stock with solid fundamentals, Chewy may offer an intriguing opportunity in today’s market landscape.

Source: https://finance.yahoo.com/news/1-growth-stock-down-80-114800283.html