Tiffany's Risks Are Better Discounted, Oppenheimer Says In Upgrade

The near-term risk-reward in Tiffany & Co. TIF stock is now more favorable due to recent internal initiatives and quarterly earnings, according to Oppenheimer. 

The Analyst

Oppenheimer analyst Brian Nagel upgraded Tiffany & Co. from Perform to Outperform and increased the price target from $145 to $152.

The Thesis

Three factors help alleviate the investment risk in Tiffany, Nagel said in the upgrade note. (See his track record here.)

Due to a marked pullback, shares are trading at a more accommodative valuation, the analyst said. 

“Our new 12-18 month price target of $152 (up from $145) is predicated on a mid-20s multiple applied to our new FY20 (January 2021) EPS forecast of $6.10 (up from $5.62), a level consistent with the upper end of historical trading parameters for shares." 

New 2018 guidance accounts for possible impacts from a strengthened U.S. dollar, Nagel said. 

“The U.S. Dollar Index, while off recent peaks, still tracks at its highest level since July 2017, up 3 percent year-on-year. Sales to foreign tourists account for nearly 20 percent of domestic sales at TIF. We are optimistic our 3-5 percent comp forecast for Q3 and Q4 discounts adequately any currency-related headwinds,” the analyst said. 

Key internal initiatives are being enacted as demand dynamics are strengthening, he said. 

“Under Chief Artistic Officer Reed Krakoff, TIF is now more aggressively launching new products and marketing campaigns. The early reads of this initiative through Paper Flowers, Believe in Dreams and the Believe in Love campaign have been positive; the next major launch is expected [in] September with Tiffany True, a new engagement jewelry design." 

Price Action

Tiffany shares were up 1.5 percent at $125.23 at the time of publication Wednesday. 

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Posted In: Brian Nagelinternal initiativesJewelry Stores IndustryOppenheimerU.S. DollarAnalyst ColorUpgradesPrice TargetAnalyst Ratings