Chewy's post-earnings surge may be only the beginning of a big rally for the company, according to Barclays. The bank in a Thursday note reiterated its overweight rating and $48 price target on the stock, which indicates a nearly 80% gain from Thursday's close. That would take Chewy back to levels it hasn't traded at since June. Though Chewy popped 13% on Wednesday after issuing upbeat sales guidance, the stock is still down 77% from its 2021 high when it hit $120. The stock initially declined as post-pandemic demand slumped and competition increased with other companies. While the e-commerce pet products and services company's sales missed in its fourth-quarter report, investors were pleased by the strong full-year 2026 revenue guidance, wrote Barclays analyst Trevor Young. He added the company also delivered on expected EBITDA margin expansion in its full-year guidance. CHWY YTD mountain CHWY year-to-date chart. "Even though diminished [gross margin] lift vs. prior years does give us a little bit of pause – as we viewed this as the greatest contributor to EBITDA expansion as CHWY works towards its long-term goal of ~10% – we nevertheless are encouraged by implied stronger incremental margins resuming this year," Young wrote. The report led Young to call the stock one of the "more compelling" names in small and mid-cap e-commerce right now. Young also was pleased that Chewy quantified how artificial intelligence will affect its business. The company revealed that headcount was flat year-over-year, a trend the analyst expects to continue amid new AI efficiencies. In a moment when the market is worried about the technology disrupting a slew of online companies' business models, Young believes Chewy is a safe play. "We think there is a lot to like in CHWY right now, and as a name that is perhaps a bit more immune to AI disintermediation worries," he wrote. "We think investors should give this name a fresh look."
