Credit Suisse: Sale Or Merger Is PetSmart's 'Most Important Driver'

After months of activist pressure, PetSmart PETM confirmed it is exploring strategic alternatives.

“In our view, that is the most important driver of PETM's stock right now,” writes Credit Suisse analyst Seth Sigman. Other than sale or merger, full value is already priced into PetSmart shares, he continued.

PetSmart also announced the $130 million acquisition of Pet360, Tuesday. “The deal at $130 million in small given the other options being discussed, but the rationale and financial impact will be important, as PETM seems to be one of few brick and mortar retailers going down this path.”

Related: PetSmart Up On Report It Will Go On Block

With Pet360, PetSmart now controls nine of the 10 top pet websites. Because Pet360 site users are a different demographic, Credit Suisse suggests the acquisition may be a portal to strong online sales growth.

The research report also touched on second quarter earnings. Sigman writes that the report was weak, as expected, and that he is looking for cost reduction in future quarters.

Credit Suisse’s $65 price target is based on 15 times estimated 2014 earnings. Shares of PetSmart were last trading at $71.35, up 2.4 percent from Tuesday’s close.