The Benchmark Company Reiterates Sell on Blue Nile (NILE)

The Benchmark Company is out with a research report this morning, where it reiterates its Sell rating on Blue Nile Inc. NILE; it has a $30.00 price target on the stock. The Benchmark analysts said that they believe NILE will experience minimal revenue and profit growth due to impaired discretionary US consumer spending. They added that “persistent high levels of unemployment coupled with low consumer confidence may limit sales growth, especially at higher price points with diamond costs up 16% year over year.” The analysts noted that the company is experiencing increased competition from Amazon AMZN and eBay EBAY, who both offer customizable engagement rings, as do a slew of online niche retailers with “comparable inventory at similar price discounts, including Diamond.com, JamesAllen.com and Gemvara.com.” As for valuation, the analysts remarked, “Blue Nile trades at 41x our 2011E EPS of $1.00. Our ecommerce index trades at a group average of 20x. Leading Internet retailer Amazon (AMZN-Buy) trades at 38x. Using 30x 2011E EPS, we maintain our price target for Blue Nile of $30 per share and rate NILE a Sell.”