PetMed Express Lowered to Hold

PetMed Express (PETS - Analyst Report) and subsidiaries, doing business as 1-800-PetMeds, is a leading nationwide pet pharmacy. The company markets its health products for dogs, cats, and horses direct to the consumer through national television, online, and direct mail advertising campaigns.

We are downgrading PetMed Express from Buy to Hold and reducing our 6-month target price from $21 to $17. The company should continue to report solid results thanks to management s focus on increasing its market share and cutting operating costs. What's more, the company's solid sales trends in a difficult environment, cost-cutting efforts, and clean balance sheet ($44 million in cash and $0 debt) should continue to support its stocks price.

Even so, we believe these positives are now reflected in PetMed's stock, which is currently trading at almost 17x our fiscal 2009 EPS estimate.