I see nothing but cautious comments on Blue Nile (NASDAQ:NILE) this morning after extremely cautious guidance provided by management last night.
The stock is trading around $40 this morning after Citigroup and Lehman cut their ratings to Hold and several other firms are cutting their estimates and targets.
Must say I'm a bit of a contrarian in NILE this AM as one could see this one coming a mile away. There is close to a 30% short interest in the name, which pretty much proves my point.
What keeps NILE as a Hold vs. a Sell are: 1. Clear market share gains, 2. Long-term international growth opportunity, 3. A 6% '08 FCF yield with buyback potential; 4. Unique supplier relationships; and 5. A strong execution track record.
So I'm buying a small stake in NILE here around $40 betting that:
- Management is being overly cautious
- Shorts will want to bag at least part of the huge gain they are sitting on
Let's see what happens.