Building My Daughter's Portfolio: Why Chewy Offers Value in 2026

When my daughter recently turned 10 years old, it became time to add a new holding to her investment portfolio. This year, after considering several options like Nintendo, Mondelez, and Rocket Lab USA, she ultimately selected Chewy as her pick—a decision that offers both emotional resonance and compelling financial logic. The timing appears particularly interesting: the pet goods e-commerce leader’s share price has declined significantly from recent peaks, yet the underlying business continues to show genuine strength.

A Market Downturn Presents an Unexpected Opportunity

The disconnect between Chewy’s operational trajectory and its current stock valuation creates an intriguing setup for long-term investors. Since debuting on public markets in 2019 at modest valuations, the company experienced a dramatic run-up to $100 per share by 2021. However, that valuation proved unsustainable, and the stock subsequently corrected sharply to approximately $15 over the following years.

What makes this situation noteworthy isn’t the price volatility itself, but rather what happened to the business during this entire period. While the stock endured a wild ride, Chewy’s operational foundation continued to strengthen substantially. This divergence between market sentiment and business reality is precisely where thoughtful investors often discover opportunities.

The numbers tell the story clearly. Revenue has expanded roughly five-fold since inception. Gross profit margins expanded approximately 10 percentage points. More impressively, the company transitioned to genuine profitability in both net income and free cash flow metrics. The most telling metric: active customers more than doubled from 10.6 million in 2019 to 21.2 million today.

Now trading down 32% from its 52-week high despite delivering acceptable quarterly earnings, the stock appears to reflect pessimism that doesn’t match the business progress.

Chewy’s Fundamentals Tell a Different Story Than Its Stock Price

Chewy operates as far more than a simple pet goods retailer. The company has built a comprehensive ecosystem around pet ownership that extends well beyond selling food and toys.

Consider the operational philosophies that define the business: The company refunds purchased food from customers whose pets have passed away and enables those customers to donate the remaining inventory. It sends thoughtful care packages to customers navigating difficult pet-related transitions. These practices reveal a business that understands its customers’ emotional connections to their animals.

Beyond sentiment, Chewy has constructed powerful recurring revenue mechanics. The Autoship feature enables customers to schedule regular bulk deliveries of food, medicine, and other repeat-purchase items. This creates predictable revenue streams and strengthens customer lifetime value. The Chewy+ rewards program deepens loyalty among its most frequent buyers. The company’s private-label brand, Get Real, offers higher-margin products. New initiatives in advertising and veterinary care (Chewy Vet Care) represent expansion into higher-profit categories.

This layered business model means that as the company matures, profitability could expand more rapidly than revenue growth suggests. Recent quarterly sales growth of 8%, while seemingly modest compared to the historical 20% annualized growth, actually reflects a more normalized growth phase. The meaningful opportunity lies in margin expansion rather than revenue growth alone.

At a valuation of 26 times forward earnings, Chewy doesn’t trade at the bubble levels of 2021. Yet the valuation still reflects meaningful skepticism about the company’s ability to grow into its scale.

Why My Daughter Selected Chewy for Her Growing Portfolio

From my daughter’s perspective, selecting Chewy for her portfolio made immediate sense. She loves dogs and genuinely enjoys purchasing treats and birthday gifts for the pets in her life. This personal connection to the business is important—it transforms the stock from an abstract ticker symbol into a company whose mission she understands and cares about.

Following the philosophy that David Gardner of Motley Fool popularizes through the Garner-Kretzmann Continuum—owning at least one stock for each year of your age—we approached this selection as an opportunity to deepen her understanding of investing through genuine interest. If investment decisions don’t stem from curiosity and engagement, they rarely embed into long-term thinking.

The simplicity of Chewy’s core business also matters from an educational perspective. Unlike more complex companies or speculative ventures like Rocket Lab, Chewy’s value proposition is immediately understandable. You can walk into a customer’s home and see Chewy’s products. The business logic is transparent and relatable for a young investor building foundational knowledge.

Operational Excellence Drives Long-Term Growth Prospects

From an analytical standpoint, Chewy represents the kind of business that rewards patient capital. The company excels at operational fundamentals—it does the essential things exceptionally well.

The subscription and recurring revenue model creates a moat around customer relationships. New customers discovering the service often transition to regular purchasers because the automatic delivery mechanism solves a genuine problem. Switching costs, while not astronomical, increase over time as customers integrate Autoship into their pet care routines.

The expansion into higher-margin businesses like veterinary services, pet insurance, and advertising creates leverage. As Chewy persuades its 21+ million active customers to utilize these adjacent services, the revenue-to-profit conversion ratio should improve meaningfully.

The company’s scale advantage in purchasing directly from pet product manufacturers enables cost advantages that smaller competitors cannot match. This translates to margin protection and pricing flexibility.

Evaluating the Investment Case at Current Valuations

For my daughter’s long-term portfolio, Chewy represents the kind of selection that could compound substantially over years and decades. The company operates in a non-discretionary category—pet owners will continue purchasing food and care supplies regardless of economic conditions. The business has demonstrated it can achieve profitability while maintaining growth.

The current valuation discount reflects temporary market pessimism more than deteriorating fundamentals. As the company continues to demonstrate margin expansion and proves it can grow into its scale at these valuation levels, investor sentiment will likely shift.

This isn’t a guaranteed outcome, of course. Stock market performance always carries uncertainty. However, for patient investors willing to hold through the inevitable noise, Chewy’s combination of operational progress, customer growth, and margin expansion possibilities presents a rational case for patient accumulation. My daughter’s instinct to add this holding to her portfolio, grounded in both emotional connection and fundamental analysis, appears well-considered for the long-term horizon ahead.