High Valuation, Weak Near-Term Outlook Could Hurt TIF Stock

Tiffany’s (TIF) expects its top- and bottom-line growth to be weak in fiscal 2019’s first half, with sales pressured by the US dollar’s strengthening and an anticipated decline in foreign tourist spending. A tough YoY (year-over-year) comparison in the first half of fiscal 2019 is also expected to hurt sales.

Analysts expect Tiffany’s top line to fall 1.3% in fiscal 2019’s first quarter, and its sales to be roughly flat in the second quarter. In fiscal 2019, Tiffany’s top line is expected to mark low-single-digit growth.

Sales weakness and margin pressure are expected to hurt Tiffany’s bottom line in fiscal 2019’s first half, and management expects its EPS to fall. In fiscal 2019, analysts expect Tiffany’s bottom line to grow ~7%, reflecting an increase in the year’s second half.

Tiffany’s stock was up 24.5% year-to-date as of yesterday, though this uptrend may not continue given the company’s weak financial results. Tiffany’s forward PE multiple is 21.6x, which looks expensive given the company’s expected sales and earnings weakness.

Of the 27 analysts covering TIF stock, 16 recommend “buy,” and 11 recommend “hold.” Their average target price of $107.36 for the stock implies a 7.3% upside based on its closing price of $100.06 yesterday. However, we expect analysts to lower their target price based on the company’s soft sales numbers and weak outlook.