Will Viking Global’s Bigger Bet on Chewy’s Recurring Revenue Model Change Chewy’s (CHWY) Narrative?

Simply Wall St.01-15

Recently, hedge fund Viking Global Investors boosted its stake in Chewy by very large, adding over 8 million shares and bringing its total ownership to about 13.5 million shares, signaling increased ...

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This move highlights how a major institutional investor appears to view Chewy’s recurring, subscription-heavy revenue model as an important asset amid recent operational challenges. We’ll now examine how Viking Global’s larger position could influence Chewy’s investment narrative, particularly around its subscription-led, recurring revenue profile. Find companies with promising cash flow potential yet trading below their fair value.AdvertisementChewy Investment Narrative RecapTo own Chewy, you generally need to believe its Autoship driven, recurring revenue model can support steady growth and improving profitability, even if customer growth stays modest. Viking Global’s bigger stake may support sentiment around that thesis, but it does not materially change the near term focus on rekindling active customer growth, or the key risk that heavy reliance on subscriptions could hurt revenue if customer habits or service quality shift. The recent updates to Chewy’s share repurchase program, including buying back over US$195.98 million of stock since mid 2024, matter here because they sit alongside Viking’s increased ownership and shape how much of Chewy’s future earnings existing shareholders might claim. Together, these capital allocation choices interact with the Autoship led model and the goal of expanding margins toward management’s long term targets. Yet behind Chewy’s subscription strength, there is still meaningful risk around what happens if Autoship growth slows or customer behavior changes that investors should be aware of... Read the full narrative on Chewy (it's free!)Chewy's narrative projects $15.1 billion revenue and $467.3 million earnings by 2028. This requires 7.7% yearly revenue growth and about an $79.1 million earnings increase from $388.2 million today.Uncover how Chewy's forecasts yield a $44.95 fair value, a 40% upside to its current price.Exploring Other PerspectivesCHWY 1-Year Stock Price Chart Seven members of the Simply Wall St Community estimate Chewy’s fair value between US$44.41 and US$56.70, highlighting how far opinions can spread. Against this, Chewy’s heavy dependence on Autoship subscriptions means any change in customer behavior could have wide implications for the business, so it is worth weighing several viewpoints before forming your own.Explore 7 other fair value estimates on Chewy - why the stock might be worth just $44.41!Build Your Own Chewy NarrativeDisagree with existing narratives? Create your own in under 3 minutes - extraordinary investment returns rarely come from following the herd.A great starting point for your Chewy research is our analysis highlighting 3 key rewards and 1 important warning sign that could impact your investment decision.Our free Chewy research report provides a comprehensive fundamental analysis summarized in a single visual - the Snowflake - making it easy to evaluate Chewy's overall financial health at a glance.Searching For A Fresh Perspective?Don't miss your shot at the next 10-bagger. Our latest stock picks just dropped:This technology could replace computers: discover 29 stocks that are working to make quantum computing a reality.We've found 12 US stocks that are forecast to pay a dividend yield of over 6% next year. See the full list for free.Outshine the giants: these 25 early-stage AI stocks could fund your retirement.  This article by Simply Wall St is general in nature. We provide commentary based on historical data\n    and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your\n    financial situation. We aim to bring you long-term focused analysis driven by fundamental data.\n    Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material.\n    Simply Wall St has no position in any stocks mentioned.New: AI Stock Screener & AlertsOur new AI Stock Screener scans the market every day to uncover opportunities.• Dividend Powerhouses (3%+ Yield)• Undervalued Small Caps with Insider Buying• High growth Tech and AI CompaniesOr build your own from over 50 metrics.Explore Now for FreeHave feedback on this article? Concerned about the content? Get in touch with us directly. 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