Chewy (CHWY) cut its fiscal 2026 revenue guidance due to a weak pet spending backdrop and maintained its fiscal 2026 EBITDA margin guidance, while the main debate is whether the cut was "enough" for estimates to trough, Morgan Stanley said Wednesday in a note.
On an organic basis, revenue guidance was cut by about 215 basis points to 5.1% to 6.3%, from 7.3% to 8.5%. Although the cut was larger than Morgan Stanley and the buyside had anticipated, the brokerage is cautiously optimistic that Chewy has reset expectations enough that further cuts can be avoided, according to the note.
The investment firm said it sees material upside on a 12-month time horizon, but shares may take some time to re-rate. The fiscal 2026 guidance is a major step in the right direction, but is not completely de-risked if the macro continues to deteriorate, it added.
The risk/reward remains sharply skewed and it presents a compelling entry point for long-term investors, even if the near-term remains murky, the brokerage said.
The firm trimmed revenue estimates by 1% each for fiscal 2026 and 2027.
Morgan Stanley kept an overweight rating on Chewy and lowered the price target to $42 from $43.
Shares of Chewy were down more than 4.7% in Thursday trading.
Price: 19.05, Change: -0.93, Percent Change: -4.65
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