Chewy Is Down 23% in 2026. Is This a Once-in-a-Lifetime Buying Opportunity?

<p>The stock market got off to a good start this year, but it dropped following the start of the Iran war. The <a href="https://www.fool.com/investing/stock-market/indexes/sp-500/?utm_source=yahoo-host-full&amp;utm_medium=feed&amp;utm_campaign=article&amp;referring_guid=19a4f0cd-b8e6-4b5b-ad24-48a6abc04b6e">S&amp;P 500 index</a> lost 1% from the end of 2025 through March 11.</p>
<p>Individual stocks have performed both better and worse, of course. Chewy (NYSE: CHWY) falls into the latter category, its share price having dropped about 23% this year.</p>
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<p>A sharp stock price decline doesn't mean you should rush out and buy the shares, however. It's important to look at Chewy's long-term fundamentals and valuation before making that determination.</p>
<h2>Understanding the business</h2>
<p>Chewy hasn't been in existence for very long. It started in 2011.</p>
<p>The company sells pet products, supplies, and prescriptions <a href="https://www.fool.com/investing/stock-market/market-sectors/consumer-discretionary/top-ecommerce-companies/?utm_source=yahoo-host-full&amp;utm_medium=feed&amp;utm_campaign=article&amp;referring_guid=19a4f0cd-b8e6-4b5b-ad24-48a6abc04b6e">solely online</a>. Revenue was growing at a nice clip before the start of the COVID-19 pandemic, but the rate accelerated after pet adoption soared when people were forced to stay home.</p>
<p>Chewy's revenue went from $4.8 billion in fiscal 2019 (ended Feb. 2, 2020) to $10.1 billion in fiscal 2022 (ended Jan. 29, 2023).</p>
<p>Naturally, this growth proved unsustainable as people's lives returned to greater normality. Still, management has focused its attention on customer retention and additions, and it's producing solid revenue gains.</p>
<p>Active customers (those who ordered a product or service within the last year) grew 4.9% year over year in the third quarter of fiscal 2025 (ended Nov. 2, 2025) to 21.2 million. Importantly, sales per active customer increased by the same percentage, to $595.</p>
<p>Revenue from Chewy's recurring delivery service, which helps retain loyal customers and provides a stable revenue source, continued to rise, gaining 13.6% to $2.6 billion. Chewy produced solid, if not spectacular, revenue growth of 8.3%.</p>
<h2>The valuation</h2>
<p>It certainly looks like Chewy is moving in the right direction. However, despite this year's price drop, the shares still look richly valued.</p>
<p>The stock has a price-to-earnings (P/E) ratio of 52. While that's down from 68 at the end of 2025, it's still expensive. Using the S&amp;P 500 as a proxy for the market, the index has a P/E multiple of 29.</p>
<p>The market's valuation reflects high-growth earnings expectations. Can Chewy meet them?</p>
<h2>Is this a rare opportunity?</h2>
<p>Perhaps Chewy's revenue growth will accelerate as it pursues growth initiatives like opening its own veterinarian clinics, which management stated have gotten off to a good start.</p>