TIF – Tiffany & Co: A Rollercoaster Stock, Enjoy the Ride

By Douglas A. McIntyre Published Apr 16, 11:16AM EDT

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By CrossProfit

04/16/2007

The majority (75%) of revenue is generated in the US and Japan.

TIF has very limited exposure to China and India; hence, both growth countries are not factors. Based on average Chinese wages being $330 per month, coupled with current growth rates, it will take at least a decade before TIF can look at China as a potential marketplace.

We still can not figure out why the EU is off TIF’s map. Latin America, Canada and Europe combined account for less than 23% of sales. Little Switzerland (2002 acquisition) has little to do with Switzerland and is based in the Caribbean.

Traditionally, fiscal Q4 accounts for 34% to 38% of sales with fiscal Q2 being TIF’s second strongest quarter (FY ends January). Recent share price behavior is reminiscent of the 2003 steep climb. What ensued in 2003; when fiscal Q1 FY2004 was reported, there was a sharp PE correction to the downside.

In 2003, the stock traded down from $48 to $28 within six months. We do not foresee a low of $28; however $34 is not unthinkable. The difference between the two years is that share price fluctuations in 2003 were in expectation of a strong Q4 and 2007 is in reaction to a strong Q4. The rest is the same.

The recent run-up in TIF’s share price assumes a stronger than anticipated FYQ1. We do not anticipate 15% YOY revenue growth and suspect that when TIF reports 6-7% YOY growth in May, there will be a steep share price correction.

The same pattern occurred in 2001, 2002, 2003, 2005 and 2006. Only 2004 was the exception to the rule due to the launch of Iridesse stores in the U.S. and rumors that never materialized.

Estimated EPS for FY2008 is $1.93 and we will have to wait and see if same store sales remain stagnant in Japan before calculating FY2009.

TIF is a rollercoaster stock. Enjoy the ride!

Disclosure: No conflicts.

http://www.crossprofit.com

About the Author Douglas A. McIntyre →

Douglas A. McIntyre is the co-founder, chief executive officer and editor in chief of 24/7 Wall St. and 24/7 Tempo. He has held these jobs since 2006.

McIntyre has written thousands of articles for 24/7 Wall St. He is an expert on corporate finance, the automotive industry, media companies and international finance. He has edited articles on national demographics, sports, personal income and travel.

His work has been quoted or mentioned in The New York Times, The Wall Street Journal, Los Angeles Times, The Washington Post, NBC News, Time, The New Yorker, HuffPost USA Today, Business Insider, Yahoo, AOL, MarketWatch, The Atlantic, Bloomberg, New York Post, Chicago Tribune, Forbes, The Guardian and many other major publications. McIntyre has been a guest on CNBC, the BBC and television and radio stations across the country.

A magna cum laude graduate of Harvard College, McIntyre also was president of The Harvard Advocate. Founded in 1866, the Advocate is the oldest college publication in the United States.

TheStreet.com, Comps.com and Edgar Online are some of the public companies for which McIntyre served on the board of directors. He was a Vicinity Corporation board member when the company was sold to Microsoft in 2002. He served on the audit committees of some of these companies.

McIntyre has been the CEO of FutureSource, a provider of trading terminals and news to commodities and futures traders. He was president of Switchboard, the online phone directory company. He served as chairman and CEO of On2 Technologies, the video compression company that provided video compression software for Adobe’s Flash. Google bought On2 in 2009.