Chewy upgraded to Buy from Neutral at Citi

Citi analyst Steven Zaccone upgraded Chewy (CHWY) to Buy from Neutral with a price target of $40, up from $28. In the near-term, the firm sees a” modest” Q3 sales and EBITDA beat, driven by steady demand and strong cost execution. Chewy is reaching a positive inflection in active customer count growth in the second half after 2024 years of declines, and is gaining market share relative to the pet retail backdrop which should build as industry growth improves in 2025, the analyst tells investors in a research note. The firm says Chewy “controls its own EBITDA destiny with idiosyncratic drivers” like sponsored ads, increasing volume through automated fulfillment centers, and higher health and wellness sales. Citi believes the stock’s risk/reward is favorable based on upside to Street EBITDA estimates for the next two years and the potential for multiple expansion as profit profile increases.