Tiffany & Co (TIF) got punished twice in a row after lowering future outlook twice within the last month and half. First, in November, the company announced its earnings, and while it beat the estimates, it lowered its outlook for 2012, and its shares plunged from $73.62 to $66.35 within the next few days. After that, the stock price started to creep up, little by little, up until December 7th. After that, it plunged further to $62.43. By January 9th, the stock priced climbed up to $66.92, but another lower outlook came from the company regarding year 2012, and the stock price plunged further to $59.94. Between January 9th and January 18th, the stock priced moved very little to $59.82.
It seems like, after having priced in 2 lowered outlooks, the company's stock price hit the bottom. From here, it should move upwards unless a strong downward pressure happens. I don't expect a third lowered outlook anytime soon as the company already lowered their outlook twice in the recent past. TIF is a growth stock, and the company posted very strong numbers in 2011. While the numbers may not be as strong in 2012, medium to long term investors (i.e., those that are hoping to buy and keep the stock for 2-5 years) should see the company growing in the foreseeable future.
The slowing economy in Europe may be a threat, but the company has growing demand everywhere else in the world, including Asia and Russia. In the last quarter, the company announced a worldwide sales growth of 21%, and this trend is likely to continue in the future. The company's net earnings rose by 63% in the third quarter due to increased demand and higher operating margin. This is also a trend that is likely to continue once the world economy goes back to track.
Some may say that the company did not perform that well in the holiday season, but I would not agree. Last holiday season, many companies in many sectors had to announce outrageous discounts, cutting well into their profit margins in order to increase their revenue, however, Tiffany did not go for any discounts, and still had decent sales. This is a company that does not want to hurt its brand name by giving away discounts.
The fact that precious metal prices are coming down should also help the company's profit margin in the future. Another point to make is that this a significant number of this company's clients are tourists. For example, Tiffany announced that nearly half of their customers in the New York stores were actually not New Yorkers, but tourists. While the economy may be slowing for the first half of 2012, I believe that rich people rarely get hurt from economic downturns, and they should still be able to maintain most of their wealth.
Another threat to this company was the fact that many financial firms lowered or cancelled their employee bonuses in late 2011 and early 2012, and these employees usually become clients of Tiffany, but this is already priced in by now. The company keeps opening new stores, and it is expected to grow 20-25% annually, for the next 5 years.
In the last year, the stock traded for between 54 and 84 dollars, and at its current price of 59 dollars, the stock looks very attractive for medium to long term investors.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.