Atlantic Equities Upgrades Tiffany Following Big Sell-Off

Tiffany & Co TIF has taken a huge hit in the past six months, but one Wall Street analyst said Thursday the discounted valuation provides an excellent buying opportunity.

The Analyst

Atlantic Equities analyst Daniela Nedialkova upgraded Tiffany from Neutral to Overweight and reiterated her $112 price target for the stock.

The Thesis

The sell-off in Tiffany stock has been primarily driven by fears over a macro slow-down rather than any company-specific changes, Nedialkova said.

“Having moved past the announcement of the expected Holiday slowdown, and with preliminary FY19 guidance set at a conservative level, allowing for further macro-driven volatility, we see a good opportunity to enter into a high-quality fundamentally strong brand story close to the bottom end of the historic trading range,” she wrote in the note.

Tiffany’s earnings multiple has contracted from about 28 to around 18 in the past six months as the stock price has plummeted 35 percent. Volatility in the stock market and concerns about the impact of the trade war on China demand are the primary causes of the weakness, Nedialkova said. However, at today’s valuation, she said the stock is pricing in further demand deterioration that it unlikely to occur.

Instead, Nedialkova said many of these issues are likely to be resolved in the near-term and could serve as positive catalysts for the stock.

While the environment has been volatile, Nedialkova said Tiffany’s fundamentals are solid, including stable comps and expanding gross margins. She said Tiffany remains a high-quality brand with a credible management team and a long-term track record of success.

Price Action

Tiffany shares traded at $88.07 Thursday afternoon.

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