Investing.com -- Mizuho upgraded Chewy (NYSE:CHWY) Outperform from Neutral in a note Friday, raising its price target for the stock to $42 per share from $24, citing strong potential for growth in 2025.
The firm views Chewy as a top pick within the consumer internet space, emphasizing the company's solid position for a significant rebound.
The analysts are particularly optimistic about Chewy's model, adding that the company is "entering beast mode for 2025" driven by several key factors.
Mizuho (NYSE:MFG)'s bullish outlook is based on Chewy's ability to expand its EBITDA margins by a high-single-digit to double-digit percentage, fueled by multiple internal levers.
“Chewy notches to our Top Pick overall and within our Consumer Internet vertical,” the note reads.
Mizuho sees the company's mobile app as an under-penetrated growth opportunity, with tactics to drive downloads already showing promising results.
“Tactics to drive downloads are coming with early tailwinds including higher AOVs, auto-ship attachment, Chewy+ premium membership,” they add, forecasting significant upside as app penetration increases.
Further supporting this optimism is Chewy’s advertising strategy, which is said to have been highly effective.
Mizuho points out that while the company had previously scaled back its ad spend, Q4’s increased deployment in upper-funnel channels has already delivered impressive results, with strong Black Friday and December performance.
These benefits are expected to continue through early to mid-2025.
In addition, Mizuho highlights Chewy’s growing retail media business and the underappreciated potential of its veterinary clinics. The analysts see a near-term catalyst in unveiling the unit-level economics of these clinics, projecting strong revenue growth and healthy EBITDA margins.
Mizuho’s bull case for the stock, which suggests a $54 price target, represents 50% upside potential.