The online diamond retailer reported fourth quarter revenue of $90.7 million and GAAP profits of 35 cents a share, which topped the Street consensus of $91.8 million and 31 cents.
But the outlook the company provided looked soft. For the first quarter, the company sees revenue of $61 million to $63 million, with GAAP EPS of 14-15 cents a share; the Street has been at $62 million and 17 cents. For the full year, Blue Nile sees revenue of $290 million to $300 million and GAAP EPS of 80-85 cents a share, which compares with Street estimates of $302.4 million and 92 cents.
Despite the apparently disappointing guidance, the stock is higher today. The Street research today is contradictory: some analysts saw the numbers as a reason to get more cautious, but others turned increasingly bullish. That’s what makes markets, I suppose, although the split here is a little hard to fathom. Here, let me show you what I mean.
Tim Boyd, Caris & Co.: Topping our list of takeaways from the quarter is NILE’s initial full-year 2007 guidance, which we view as disappointing. Based on its revenue guidance, management seems to be indicating that the competitive environment has become more challenging and [that] the outlook for the diamond engagement market in 2007 is less sanguine than we believed… downgrading NILE shares to Average from Above Average and reducing our price target to $40 from $42… our call is not to sell NILE shares, but to wait for a more attractive entry point. Jordan Rohan, RBC: Revenues were in line but due to better-than-expected gross margin and tight expense control, EBITDA and EPS beat both our and consensus estimates by a healthy margin… Increasing our price target from $40 to $44. Imran Khan, J.P. Morgan: We maintain our Neutral rating based on conservative 2007 profitability guidance. Scott Devitt, Stifel Nicolaus: Blue Nile put together another clean three months of business, modestly exceeding revenue expectations and generating about 5% upside to economic profit expectations… We are fans and we would be buyers of the shares in the mid $30s. Jim Friedland, Cowen: Results were slightly below consensus revenue and EPS estimates. The company guided  below consensus revenue and EPS consensus expectations… maintaining our Neutral rating.
Well, that’s kind of confusing. They beat, they didn’t beat; downgrade the stock, raise the target. It hurts my brain.
This morning, Blue Nile is up 57 cents at $39.17.
NILE 1-yr chart: