PetSmart (PETM) Rallies After Revealing Hedge Fund Stake

Shares of PetSmart (PETM) surged as much as 15% on July 3 after the company revealed that Barry Rosenstein’s activist hedge fund Jana Partners LLC had acquired a 9.9% ownership stake in the retailer, making it the company’s largest shareholder.

In a regulatory filing  the $10 billion firm reported owning around 9.82 million shares, which include options to buy 4,733,700 shares.

Jana Partners also revealed plans to hold discussions with PetSmart’s management and board members about ways to enhance shareholder value, including exploring a sale of the company-the fact that most likely spiked the prompted the stock to hit a near three-month high of $69 in intraday trading, and record its biggest one-day gain since May 2012.

But in a new research note, analysts at Oppenheimer said the firm views a PETM sale as unlikely in the near-term, adding it is unrealistic to expect a “quick fix” at the company. Oppenheimer maintains its “perform” rating on the stock.

PetSmart shares have a 52-week range of $55.00 – $77.32, climbing about 0.44% over the past 12 months. Year-to-date the ticker, which trades at a multiple of 14.20X next year’s estimated earnings, is down nearly 8 percent. PetSmart currently has a market cap of $6.67 billion.

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