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Blue Nile
is scheduled to report their fourth quarter 2008 results after
the market closes on Wednesday, February 18. Based on our
analysis, we at
eChristianInvesting are expecting NILE to report
disappointing results that fail to meet Wall Street’s
expectations.
Analyst
Expectations
We are
forecasting revenues of $90.8 million and EPS of $.33. This
would represent a 19% drop in revenues from last year’s $111.9
million in the same period. The current analyst consensus calls
for revenues of $94.6 million and $.36 EPS.
While
expectations have been lowered for the fourth quarter results we
believe that Blue Nile may still disappoint Wall Street. Our
checks show that traffic declined over 20% from last year. It’s
evident that consumers cut back on their spending this holiday
season with more individuals looking to trade down.
On the
positive side, expectations for 2009 have already been reduced.
Currently, analysts are expecting a 4% drop in revenues this
year. The market is probably assuming a more realistic 8-10%
decline.
Share
Performance
Blue
Nile’s shares are down 10% since the beginning of the year. Last
year, the company’s stock performance was abysmal – dropping 64%
compared to the Dow Jones index’s 34% drop.
Valuation
Shares are
now trading at 28x consensus 2009 EPS estimates. This is still
well above the relative valuations of their peer group despite
the big drop in share price last year. We would expect shares to
drop further following the company’s quarterly results and don’t
expect to see any positive catalysts until there are clear signs
of economic recovery.
Recommendation:
Sell with a $18 price target.
At the time this article was published, the author did not have
a financial position in any of the stocks mentioned in this
article.
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