Blue Nile: Bracing For Earnings (NILE)

Blue Nile, Inc. (NASDAQ:NILE) is set to report earnings after the close today, and this one could see severe price volatility after the report.  It isn’t every day that an online jewelry store trades at almost 100-times earnings, even if that is a backward looking number.  The company is around $80.00 in early trading today, and its 52-week trading range is $33.05 to $82.54.

Current estimates from First Call are $0.18 on revenues of $67.15 million.  If it offers guidance the next quarter estimates are $0.14 & $62.9 million and Fiscal Dec-2007 estimates are $0.91 and $306 million.  So it still trades at more than 80-times forward estimates.  The fact that the company has been able to deliver steady upside has helped the incredible performance.

As far as analyst calls, most analysts have price targets south of the current stock price.  The chart is still a bullish one a longer-term basis and depending on your timeframe could allow the stock to drop another $6.00 to $10.00 before any serious technical trouble on a long-term trendline.  Short-term is a much different story, so keep your timeframe in mind.  Options traders are braced for nearly a 10% move in the stock in either direction today, although the open interest has been light in its options.  Shares are up roughly 100% since the start of last quarter.

One last thing to watch for is the good old stock split.  The short interest in July was up again at more than 2.6 million shares, close to 10-days trading volume.  Blue Nile’s market cap is now more than $1.2 Billion after its last run-up. 

Jon C. Ogg
August 6, 2007

Jon Ogg can be reached at [email protected]; he does not own securities in the companies he covers.