Chewy Inc (CHWY  ) could show continued strength and subscription revenue when reporting third-quarter financials before the market opens Wednesday.

Earnings Estimates: Analysts expect the online retailer to report third-quarter revenue of $2.89 billion. That's up from $2.74 billion reported in last year's third quarter, according to data from Benzinga Pro.

Chewy missed analyst estimates for revenue in the last quarter while beating estimates in seven of the last 10 quarters.

Analysts expect third-quarter earnings per share of 8 cents, down from 15 cents per share in last year's third quarter. The company has beaten analyst estimates for earnings per share in 10 straight quarters.

If the company reports earnings of eight cents per share it would be the lowest quarterly total in seven quarters.

Guidance from the company calls for third-quarter revenue to be in range of $2.84 billion to $2.86 billion.

What Analysts Are Saying:

Bank of America analyst Curtis Nagle upgraded Chewy from Underperform to Buy. He raised the price target from $24 to $40.

The analyst said investors underestimate Chewy's expense discipline, which could lead to earnings growth.

"Stabilizing industry trends lay path to pawsitive growth," Nagle said.

Nagle said animal shelters are taking in a large number of pets, but adoption trends have improved since the start of 2024.

Pet spending also appears to have bottomed since being negative year-over-year earlier this year, the analyst added.

Chewy's website traffic jumped 6% year over year in the third quarter compared to down 11% year over year in the first quarter. That could support market share gains and a higher customer count, Nagle added.

The improving industry data could lead to stronger earnings leverage for Chewy, something Nagle said is being underestimated regarding the stock.

The analyst said Chewy's subscription-like model should command a premium and the company's low exposure to discretionary categories minimizes the impact for increased Chinese tariffs.

Nagle predicts that Chewy can beat the third-quarter Street estimate of 50,000 net adds for active customers, given the pet industry trends and website traffic. The analyst notes that over the last 10 quarters, the active customer count has been a leading indicator of which way the stock will move.

JPMorgan analyst Doug Anmuth expects Chewy to continue to execute with stable industry trends ahead for the company. He reiterated an Overweight rating and raised the price target from $33 to $37 recently.

Product improvements, better execution and stabilizing trends lead to the price target increase, Anmuth said.

"We believe pet is a growing and highly attractive category that is early in the shift online, and, in our view, Chewy is well positioned as the leader in online pet with a ~33% market share," Anmuth said.

Anmuth said the shift to online sales for the pet care sector, growth of pet health for Chewy and international expansion can help the company.

"We remain bullish on CHWY's category positioning, improving profitability, and efforts to diversify revenue into healthcare."

Chewy's Autoship subscription program is called a "key competitive advantage" by the analyst.

Here are other analyst ratings for Chewy and their price targets:

• Piper Sandler: Maintained an Overweight rating, raised price target from $35 to $40
• Morgan Stanley: Maintained an Overweight rating, raised price target from $33 to $36
• Baird: Maintained an Outperform rating, raised price target from $35 to $40
• Deutsche Bank: Maintained a Hold rating, raised price target from $24 to $28
• Barclays: Maintained an Overweight rating, raised price target from $34 to $40