Tiffany’s Still a Strong Brand

May 26, 2012
J. Webster
Comments Off on Tiffany’s Still a Strong Brand

Everybody and their mother is cutting their price targets on Tiffany & Co. (TIF), Goldman Sachs and Deutshe Bank to name a few, but is the stock close to a bottom?

The stock has been beaten down this past week after it warned about slower sales this coming year. On Fast Money, Dan Nathan warned about slower growth from Asia and Europe, “50% of sales comes from overseas. A disappointment in Europe and Asia could send this stock lower”. He was right and the stock has sunk. In late March, Tiffany’s was trading for $73 a share, now it’s down to around $56 – almost a $20 drop in two months.

However, Tiffany’s is one of those unique brands in the United States and in the world, it will recover. It’s not like people will stop buying jewelry for loved ones. Plus, the stock does have a dividend, which is 2.20% right now. It might be wise to keep an eye on this stock as the dividend improves as the stock drops lower.

Here’s the info on Goldman Sachs lowering estimates for Tiffany’s:

The firm maintained its “Neutral” rating on TIF but cut its price target from $70 to $64. That new target suggests an 11% upside to the stock’s Thursday closing price of $57.59.

A Goldman analyst commented, “TIF reported a below plan 1Q as original guidance failed to adequately incorporate tough comparisons (particularly in the Americas). The weakness was broad based, with little variation across price strata. Management attributed the softness to constrained spending from financial sector employees, a highly promotional environment, and resistance to entry level product price increases. Tourism at the NYC flagship was flat yoy, with increased Asian tourism offsetting declines from Europe. Given the disappointing start to the year, management lowered FY12 EPS guidance to $3.70-$3.80 from prior $3.95-$4.05. As such, we are lowering our FY12/FY13/FY14 EPS Estimates to $3.75/$4.40/$5.05 from $4.00/$4.65/$5.33 prior.”

However, this was this interesting tidit from Goldman about overall jewelry demand in China – this comes from a piece on a competitor’s new IPO:

Goldman expects jewelry demand in China to rise 26 percent per year from 2010-20, in line with overall demand for luxury goods and driven by an increase in wealthy individuals in the country.

The outlook for Tiffany’s all depends upon what happens in Europe and countries like China – if the global economy slows down then nobody is going to buy expensive jewelry, no matter how much they’re in love.

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