In recent times, investors have focused on the potential impact of President Trump’s import tariffs on the economy — and that’s upset the performance of growth stocks, with the idea that they could be the first to experience pressure if the economy weakens. The growth-heavy Nasdaq and the broader S&P 500 each shifted into correction territory in March, and though they’ve both emerged from the zone, positive momentum hasn’t yet returned to the market.

At times like these, investors seeking growth should be on the lookout for growth players that could navigate any market environment thanks to elements such need for the goods and/or services they provide, customer loyalty, and a solid earnings track record. And if the player happens to be trading for a good price, then it’s likely to make a good buy. One particular stock fulfills these requirements and more — and my prediction is this bargain growth player will soar in 2025. Let’s check it out.

Everything your pet needs is right here
This company is the loyal friend of your furry friends: It’s Chewy (CHWY), the online seller of everything your pet needs, from food and toys to prescription medicine and insurance plans. In recent years, Chewy has made its way to profitability, delivered strong earnings growth, and developed a powerful base of return customers.

Before digging into the specifics, it’s important to note that Chewy could see revenue growth even in a tougher economic environment because it sells essentials pet owners need and offers them convenience and value. So it’s not as vulnerable to shifts in the economic backdrop as a retailer of discretionary items. Also, the amount pet owners have been spending on pets has grown annually from 2018 through today and is expected to increase again this year, according to the American Pet Products Association. Last year, Americans spent nearly $152 billion on their pets and this year that figure is projected to reach $157 billion.

Now let’s consider Chewy’s performance. The company is most known for its e-commerce platform, and one of the keys to its success is the relationship it’s built with its customers. We can see this through numbers from Autoship, its service that automatically will reorder and ship your favorite products to you.

Autoship has consistently represented more than 70% of Chewy’s overall revenue, showing customers keep coming back — and the great thing about this is it offers us visibility on future revenue. In the recent quarter, Autoship posted yet another win, accounting for more than 80% of total sales. And Autoship customer sales climbed 21% in the quarter year over year and 11% in the full year.

On track to conquer a new market
On top of the e-commerce success, Chewy also may be set to conquer another major area: vet care, a $25 billion market. The company launched its first veterinary clinics early last year — and has opened eight so far, at the top range of its plan. The company, which plans more openings this year, says this move has boosted current customers’ engagement and helped it acquire new customers too.

All of this sounds great — but why do I think Chewy will soar this year in particular? One factor, as mentioned, is the idea that Chewy’s revenue may continue to grow regardless of the economic backdrop. But there’s more. Chewy has reached some key milestones. The company ended the recent fiscal year with its first year-over-year growth in active customers in eight quarters — and active customer performance remained strong during the past two quarters. Chewy, from the trends it’s seeing, predicts that customer growth will continue this year.

The company also has taken important steps when it comes to profitability, with adjusted EBITDA margin of 4.8% coming in at the high end of guidance. Chewy shifted 80% of adjusted EBITDA into free cash flow for the year — and as a result free cash flow reached a record of more than $452 million. All of this should support Chewy’s continued growth and returns to shareholders.

A bargain price following recent declines
So, today, Chewy has demonstrated its ability to gain traction with its audience and grow, all while maintaining profitability, and the company’s expansion into the vet clinic market should start bearing fruit in the quarters to come. This makes it look like a bargain, trading at 25 times forward earnings estimates, after declining 10% over the past month.

Though the mood hasn’t favored growth stocks in recent weeks, I think Chewy may stand out for all of the points I’ve mentioned above as the year progresses. And that’s why my prediction is Chewy stock may be set to soar in 2025.

— Adria Cimino

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Source: The Motley Fool