Disappointed investors did not hesitate to make their sentiments reflect on Tiffany (TIF, Financial)’s share price as this has fallen 30% in this quarter alone. The jeweler’s recent detailed guidance did not impress, as the stock lost a little more than 12% following its announcement.
After continually beating estimates in the past year, Tiffany flunked its recent quarter Wall Street revenue estimates by $40 million. The company also kept its earnings guidance unchanged for this year ($4.65 to $4.80) and indicated that it will have a lower level of operating margin — profitability — brought by higher investment expenses. The jeweler also expects its free cash flow to approach $300 million this year — more than half its prior-year figure.
A breather for Tiffany was its strong performance in China despite the ongoing geopolitical issues. Sales in China, which accounts for 19% of year-to-date sales, grew 6% in the third quarter.
Tiffany CEO Alessandro Bogliolo said, “It is worth noting that in the third quarter our sales attributed to local customers continued to grow at a strong rate worldwide and were positive in every region, with particularly strong growth in mainland China.”
Analysts also see a good upside, with an average price target of $117.72 per share — well above today’s price of $84.18 per share.
Nonetheless, the stock price decline despite a beat in earnings (not revenue) and continuing geopolitical risks, investors should wait for Tiffany’s holiday results this year on Jan. 18 and see Mr. Market’s reaction before taking action.
The 30% stock price decline may already be attractive for some. But should Tiffany’s shares suffer more blowback early next quarter for merely meeting guidance, the pullback should give the perfect pitch for a convincing long-term investment for patient investors.
Disclosure: No shares in Tiffany.
Tiffany: Short-Term Pain Could Lead to Long-Term Stock Price Gains
