UPDATE: Bank of America Downgrades The Container Store Group as Near-Term Risks are Not Priced into Valuation

In a report published Monday, Bank of America analyst Denise Chai downgraded the rating on The Container Store Group (NYSE: TCS) from Neutral to Underperform, and lowered the price target from $46.00 to $32.00.

In the report, Bank of America noted, “We are downgrading TCS to Underperform and lowering our PO to $32 on 40x 2015E EPS (from $46 on 50x) as we see risk to 4Q EPS and TCS's P/E multiple which is at significant premium to hardline peers. We are also lowering estimates (see below). In our view, both consensus estimates and guidance do not fully account for significant weather headwinds through most of 4Q.

"While shares have declined 10% since 3Q14 results were reported in early January, we see risk of further downside. With TCS trading at 43.4x 2015 EPS, a 300% premium to the hardlines average, we believe shares are priced for perfection and there is little margin for error. We also believe the expiration of a shareholder lock-up in late April could pressure shares. While we believe positive catalysts are lacking in the nearer term, we view the biggest risk to our downgrade is TCS's high short interest (37% of shares outstanding), which creates the potential for short covering.”

The Container Store Group closed on Friday at $35.17.