Blue Nile (NASDAQ:NILE) and Bidz (NASDAQ:BIDZ) are both scheduled to report Q208 results after the market closes on Tuesday, August 5. Based on our analysis, we at eChristianInvesting are expecting NILE to report disappointing results while Bidz should meet Wall Street’s consensus estimates.
For Blue Nile, we are forecasting revenues of $72.5M versus analyst consensus of $74.5M. This would represent less than a 1% increase in revenues from last year’s $72.1M in the same period.
For Bidz, we are forecasting revenues of $49.0M versus analyst consensus of $49.4M. This would represent a 25% increase in revenues from last year’s $39.1M in the same period.
While Blue Nile has historically been a darling of Wall Street, we believe that the copmany's focus on high-price jewelry (especially engagement rings) combined with a difficult economic environment will produce a disappointing quarter. While couples continue to get married, the uncertainty that abounds everywhere from the job market to the housing markets will undoubtedly lead many to consider lower cost options. Recent traffic numbers showing declining visitors seem to confirm this trend.
Bidz has taken a very different approach to the online jewelry marketplace. Its fast-paced, addictive website seems to draw even casual visitors into the action. In addition, its low prices (last quarters average sales was $56) makes its products enticing to a wide variety of customers and also insulates the business from an economic decline. Similar to the discount brick-and-mortar retailers, we believe that Bidz could actually benefit from the sluggish economic conditions as consumers look to replace their high-priced jewelry purchases with a more economical option.
To date, Blue Nile’s shares have dropped over 43% while Bidz has posted a 2% gain. Bidz share performance has been exceptionally impressive when considering that the ecommerce sector as a whole is down over 31% this year.
Blue Nile shares are now trading at 31x consensus 2009 EPS estimates while Bidz’s shares trade at only 13x consensus 2009 EPS estimates. When you consider that Blue Nile’s revenues will be essentially flat this quarter while Bidz will continue to grow at an impressive 25%, the relative discount on Bidz shares seems unwarranted. Therefore, we see large upside potential for Bidz shares (analyst consensus target price of $20) while Blue Nile’s shares will remain stagnant or even decline further (analyst consensus target price of $49).
Disclosure: At the time this article was published, the author owned shares of Bidz.