Chewy, Inc. (CHWY) stock has moved up from a recent trough, but analysts have significantly higher price targets. Its free cash flow (FCF) and FCF margins are expected to remain strong. People love spending money on their pets. As a result, shorting OTM puts and buying ITM long-expiry calls work here.
CHWY is currently at $37.00, up from a recent low of $35.11 on September 10. But, it’s still off from a peak of $42.33 on Sept. 5. My analysis is that CHWY could be worth +16% more at almost $43, based on its FCF.
CHWY stock – last 3 months – Barchart – Oct. 7, 2025
I wrote about this on Sept. 12 (“Chewy Stock Is Down After Strong FCF Results – CHWY Is Worth 15%+ More.“) I showed that CHWY could be worth $40.68 per share, and analysts had higher price targets.
My new price target for CHWY is +16% higher at $43 per share. This article will show why.
As I wrote last month, Chewy produced strong Q2 revenue and net income growth (up 8.6% and 34.8% respectively). Moreover, its FCF margin rose from 3.20% last year to 3.41%.
I expect it will post at least a 3.75% FCF margin over the next year. Analysts now project about $13.6 billion in sales next year ending Jan. 31, 2027. So, FCF will be:
$13.6b x 0.0375 FCF margin = $510 million FCF
Using a 2.857% FCF margin, which is the same as a 35x multiple, Chewy’s market value could rise to $17.85 billion:
$510m x 35 = $17.85 billion mkt cap
This is almost 16% higher than its present market value of $15.42 billion (Yahoo! Finance). In other words, CHWY stock is worth 15.76% more:
$37.00 x 1.1576 = $42.83 price target
Analysts also see a higher price target. Yahoo! Finance is at $45.32 from 28 analysts, and Barchart’s survey is $45.96. AnaChart’s survey is higher at $48.20 from 20 analysts.
The bottom line is that CHWY still looks undervalued, especially if its upcoming Q3 results show strong FCF margins.
One way to play this is to buy in-the-money (ITM) calls in longer expiry periods and also short out-of-the-money (OTM) puts to help pay for this. Let’s look at this.
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