UPDATE: Bank of America Downgrades PetSmart as Natural Food is at Risk

In a report published Tuesday, Bank of America analyst Denise Chai downgraded the rating on PetSmart PETM from Neutral to Underperform, and lowered the price target from $77.00 to $60.00. In the report, Bank of America noted, “We are downgrading PETM from Neutral to Underperform and lowering our PO to $60 (13x 2014-15 P/E) from $77 (16x P/E). "In addition to our concerns that PETM was losing share to Petco, TSCO and independents while facing adoption headwinds, we now believe that its core product category, super premium natural pet food, may be at risk from 1) the potential introduction of natural food in the mass channel, which would hurt sentiment and PETM's valuations and 2) increasing dependence on Blue Buffalo, which could alienate customers loyal to other brands which have lost shelf space in PETM's latest reset. Given a more cautious outlook, we are reducing our ests: 2014/15/16E is $4.40/4.90/5.41 ($4.48/5.07/5.67 prior).” PetSmart closed on Monday at $69.37.