(NYSE: CHWY) is struggling to maintain a high growth rate as households ease off the heavy pet adoption rate seen during the height of the pandemic. While growth slows, analysts at Morgan Stanley are instead keyed into the profit story.

The analysts noted that the macroeconomic environment is a concern, but they believe the pet goods retailer will be able to boost margins despite lackluster growth. As a result, Morgan Stanley initiated an overweight rating on Chewy stock with a price target of $27. Based on Chewy's closing price on Thursday, that price target represents an upside of 70% over the next 12 months or so.

Chewy grew revenue by just 4.2% year over year in the fourth quarter of 2023. Growth was dragged down by continued customer losses, which the company has been struggling with since the pandemic-era bonanza came to an end. This year won't be any better. Chewy expects muted pet household formation and no benefit from higher pricing. The company expects year-over-year revenue growth of just 2% in the first quarter, with 4% to 6% growth for the full year.

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Source Fool.com