Chewy vs. GameStop: Which Consumer Stock Is a Better Buy for 2027?
Investors often weigh established growth against radical corporate transformations when building long-term portfolios. Choosing between Chewy Inc.(NYSE:CHWY) and GameStop Corp.(NYSE:GME) requires balancing steady e-commerce expansion against a cash-heavy turnaround strategy.
Chewy focuses on capturing the resilient spending of pet owners through high-frequency subscriptions and health services. GameStop, once the king of physical video game retail, is now leveraging its significant capital reserves to find new avenues for growth. Both companies share a common thread in leadership but offer vastly different paths for investors looking toward 2027.
The case for Chewy
Chewy operates as a leading online retailer for pet food, supplies, and healthcare products. The company serves approximately 21.7 million active customers in the U.S. and Canada through its website and mobile apps. Its business relies heavily on the Autoship subscription program, which provides a predictable recurring revenue stream.
Beyond food and supplies, the company is aggressively expanding into pet health via its pharmacy and CarePlus insurance suite. It also operates a growing network of physical clinics under the Chewy Vet Care brand, which currently includes 18 locations. This diversification aims to capture more of the total pet care spend per household.
In FY 2025, revenue reached about $12.6 billion, representing a growth rate of roughly 6% over the prior year. The company reported net income of around $222.8 million, resulting in a net margin of approximately 1.8%. This marked an increase in total revenue even as consumer spending in some discretionary categories remained under pressure.
As of its February 2026 balance sheet, the debt-to-equity ratio was nearly 1.0x. This metric measures total debt against shareholder equity, and a ratio of 1.0x indicates the company uses equal parts debt and equity to fund operations. Its current ratio, which measures the ability to cover short-term debts with short-term assets, was around 0.9x.
During FY 2025, free cash flow was approximately $562.4 million. Note that stock-based compensation represented roughly 43% of operating cash flow, which inflates reported cash generation since it is a non-cash expense added back in the cash flow statement. This high percentage suggests that a significant portion of cash flow is tied to employee equity rewards.
The case for GameStop
GameStop is a specialty retailer of gaming hardware, software, and collectibles. As a well-known name among retail stocks , the company operates a network of some 2,200 stores globally. It utilizes these physical locations as fulfillment anchors and hubs for its gaming trade-in programs.
Under the leadership of CEO Ryan Cohen, the company has increasingly focused on capital allocation and investments. This includes the potential for large-scale acquisitions and the inclusion of digital assets in its corporate strategy. The company has also explored interest in Bitcoin as part of its broader financial management plans.
In FY 2025, revenue reached nearly $3.6 billion, which was a decrease of approximately 5.1% compared to the prior year. Despite the lower sales, net income was close to $418.4 million, providing a net margin of roughly 11.5%. This profitability was driven largely by interest income and cost-containment measures rather than retail sales growth.
As of its January 2026 balance sheet, the debt-to-equity ratio was approximately 0.8x. The company maintains an exceptionally high current ratio of nearly 15.3x, indicating a massive surplus of cash and liquid assets relative to its short-term liabilities. This liquidity provides significant flexibility for future strategic moves or acquisitions.
Free cash flow for FY 2025 was roughly $597.3 million. Because stock-based compensation made up only 0.3% of operating cash flow, the company does not face the same cash flow inflation issues as some other high-growth retailers. This reflects a very low reliance on equity-based pay to sustain its operations and cash position.
Risk profile comparison
Chewy faces intense competition from established giants like Amazon.com Inc.(NASDAQ:AMZN) and Walmart Inc.(NASDAQ:WMT). Operational risks include the complexity of managing a massive fulfillment network and the costs of expanding its veterinary services. The company also deals with regulatory hurdles in the pet pharmacy and telehealth space, including potential pushback from traditional veterinary clinics.
GameStop operates in a gaming industry that is rapidly shifting toward digital downloads, which threatens its core business of selling physical software. There is also strategic risk regarding its aggressive investment strategy, including the volatility of Bitcoin and potential instability of future acquisition targets like eBay Inc.(NASDAQ:EBAY). Furthermore, the company faces significant competition from platform holders like Microsoft Corp.(NASDAQ:MSFT) and Nintendo(OTC:NTDOF).
Valuation comparison
Chewy offers a much lower sales multiple, while GameStop trades at a more modest multiple of future earnings estimates despite its shrinking revenue base.
| Metric |
Chewy |
GameStop |
|---|---|---|
| Forward P/E |
30.4x |
17.0x |
| P/S ratio |
0.7x |
3.6x |
Valuation metrics include those sourced from Financial Modeling Prep (FMP) and may differ from those of other data providers.
Which stock would I buy for 2027?
Chewy is establishing a steady growth pattern. In a recently reported quarter, management noted that its Autoship program grew faster than overall sales, implying that many customers' standing orders will continue to provide a solid base for the company. The company also believes that in the long run, veterinarian and general pet health services are a huge untapped market for Chewy. The business recently closed on the acquisition of Modern Animal, which delivers high profitability per location and is a strong complement to Chewy's existing business.
For fiscal 2027, sales are seen rising 7% to $13.5 billion, with net income up more than 40% to around $317 million, according to consensus analyst estimates. American consumers have shown they will spend up to take care of their pets.
However, Chewy likely doesn't have a great competitive moat against brick-and-mortar competitors like PetSmart and Petco Health and Wellness Co Inc.(NASDAQ:WOOF) .
GameStop, meanwhile, has benefited greatly from its recent move to emphasize trading cards and collectibles alongside its video game business, and it is paying off. It caught many investors' eyes when it made an unsolicited bid to buy eBay earlier this year, too. Though that was rejected, reports say the CEO, Ryan Cohen, is still pursuing options around eBay, including striking a partnership with the business. Cohen has shown a lot of faith in his ability to boost GameStop's business. He's been a heavy buyer of company shares of late.
In its most recent quarter, net sales were $790.2 million, compared to $972.2 million in the prior year's second quarter. The decrease primarily reflects the prior-year launch of Nintendo Switch 2, planned store closures, and the divestiture of the company's France operations.
There were big positives, though: collectibles net sales were $356.3 million for the second quarter, or 45% of net sales, compared to $227.6 million, or about 23% of net sales, in the prior year's second quarter. Its pivot appears to have momentum.
So which is the better buy, the steady growth of Chewy or the turnaround excitement of GameStop? GameStop is a value-priced equity, but the volatility in its revenue is a concern, even if the drop is attributable to a blockbuster product in the prior year. Chewy is a rare retailer that offers remarkably consistent sequential sales at a reasonable price. Go with Chewy.
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Brendan Coffey has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Amazon, Chewy, Microsoft, Nintendo, Walmart, and eBay. The Motley Fool has a disclosure policy .
Chewy vs. GameStop: Which Consumer Stock Is a Better Buy for 2027? was originally published by The Motley Fool
