Will PetSmart (PETM) Stock Be Affected Today by This Analyst Upgrade?

NEW YORK (TheStreet) -- Deutsche Bank upgraded PetSmart Inc. (PETM) to "hold" from "sell" on Friday.

The firm increased the price target to $74 from $60 for the pet products and services company.

Deutsche Bank said the company is still fundamentally challenged, but stock has underperformed and has several non-fundamental catalysts that could support shares.

Private equity firms reportedly preparing bids for PetSmart; watch the video below for details:

"We think PETM is still fundamentally challenged as it absorbs increased competitive pressures primarily from online competition," said Deutsche Bank research analyst Mike Baker.

Shares of PetSmart closed up 1.76% to $71.64 on Thursday.

Separately, TheStreet Ratings team rates PETSMART INC as a Buy with a ratings score of A-. TheStreet Ratings Team has this to say about their recommendation:

"We rate PETSMART INC (PETM) a BUY. This is based on the convergence of positive investment measures, which should help this stock outperform the majority of stocks that we rate. The company's strengths can be seen in multiple areas, such as its growth in earnings per share, revenue growth, notable return on equity, reasonable valuation levels and good cash flow from operations. We feel these strengths outweigh the fact that the company shows low profit margins."

Highlights from the analysis by TheStreet Ratings Team goes as follows:

  • PETSMART INC has improved earnings per share by 10.1% in the most recent quarter compared to the same quarter a year ago. The company has demonstrated a pattern of positive earnings per share growth over the past two years. We feel that this trend should continue. During the past fiscal year, PETSMART INC increased its bottom line by earning $4.03 versus $3.55 in the prior year. This year, the market expects an improvement in earnings ($4.34 versus $4.03).
  • Despite its growing revenue, the company underperformed as compared with the industry average of 1.5%. Since the same quarter one year prior, revenues slightly increased by 1.4%. This growth in revenue appears to have trickled down to the company's bottom line, improving the earnings per share.
  • The return on equity has improved slightly when compared to the same quarter one year prior. This can be construed as a modest strength in the organization. Compared to other companies in the Specialty Retail industry and the overall market, PETSMART INC's return on equity significantly exceeds that of both the industry average and the S&P 500.
  • Net operating cash flow has slightly increased to $91.86 million or 5.84% when compared to the same quarter last year. Despite an increase in cash flow, PETSMART INC's cash flow growth rate is still lower than the industry average growth rate of 20.30%.
  • You can view the full analysis from the report here: PETM Ratings Report
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