rock boy

Blue Nile: A Classic Underpromise, Overdeliver Company

Interesting comments. I think you missed one small item - orders only grew 14% in the quarter y/y. Avg Selling Price (ASP) increased 11% in the quarter (and Gross Profit per order followed suit) not due to price increases but simply due to mix. The last time the company posted a double digit ASP increase was Q2 06 - 13.6%. The next quarter it was 6.3%, the quarter after that it was 2.3%. So assume that ASP growth will revert to the mean (it has averaged 5% over the last 8 quarters) and order growth remains mid teens, you have revenue growth of ~20%. Not too shabby. Assuming they earn the $1.00 they are guiding to this year and can get operating leverage they can grow earnings 30% next year (on 20% revenue growth), they'll do $1.30 next year. Also not too shabby. But you have a stock that is trading at (hope you are sitting down) 63x that 2008 number.

When they asked the CEO about the slowing order growth his response was he doesn't even think about orders just traffic. I don't think I've heard a CEO of a public Internet company utter those words since February 2000.

Net net, good company? Yes. Very good business model? Yes. Worth 63x next year's earnings? Not a chance.