Tiffany & Co continues to tumble

Tiffany & Co will report its second-quarter results on 27 July, and the jewellery giant will suffer from the economic slowdown in China.

Tiffany & Co sign
Source: Bloomberg

Tiffany & Co shares have had difficult 2015, and I foresee more turbulence ahead as the company was already suffering from a strong US dollar, and in light of China’s currency devaluation the problems are only beginning.

The company warned that first-quarter profits would slip by 30%, but in fact they only fell by 17%, and the share price held up relatively well on the back of it. The strength of the greenback was cited as the reason behind the warning.

When the dollar is riding high, it hurts both Tiffany & Co’s online overseas sales, and the in-store sales as fewer tourists will visit its shops in the US.

The move by Beijing to devalue the yuan versus the dollar will have a negative impact on Tiffany & Co’s futures sales, and the true impact will be revealed in quarters to come.

Western luxury goods companies like Tiffany & Co have been in the firing line since China devalued its currency, and it will remain in focus until China starts to show signs of stability.

When Tiffany & Co reveals its second-quarter results, the market is anticipating revenue of $1 billion and EPS of 90 cents, compared with first-quarter revenue and EPS of $962 million and 81 cents respectively. The company will report its full-year numbers on March 2016, and traders are expecting revenue of $4.32 billion and EPS of $4.23. These forecasts represent a 1.6% increase in revenue and 0.7% rise in EPS.

Equity analysts are very bullish on Tiffany & Co, and out of the 31 ratings, 15 are buys, 15 are holds, and one is a sell. The average target price is $102.75, which is 25% above the current price.

The number of short positions being taken out on Tiffany & Co has increased by 27% since the company revealed its first-quarter results, and the short interest on Tiffany & Co is at a ten-month high.

Tiffany & Co’s share price has been trading lower since August, and the support at $80 is the initial target. If that mark is punctured the next big level of support will be found at $70. The resistance at $86 will come into play should the stock move higher. 

IGA, may distribute information/research produced by its respective foreign marketing partners within the IG Group of companies pursuant to an arrangement under Regulation 32C of the Financial Advisers Regulations. Where the research is distributed in Singapore to a person who is not an Accredited Investor, Expert Investor or an Institutional Investor, IGA accepts legal responsibility for the contents of the report to such persons only to the extent required by law. Singapore recipients should contact IGA at 6390 5118 for matters arising from, or in connection with the information distributed.

This information/research prepared by IGA or IGA Group is intended for general circulation. It does not take into account the specific investment objectives, financial situation or particular needs of any particular person. You should take into account your specific investment objectives, financial situation or particular needs before making a commitment to trade, including seeking advice from an independent financial adviser regarding the suitability of the investment, under a separate engagement, as you deem fit. No representation or warranty is given as to the accuracy or completeness of this information. Consequently any person acting on it does so entirely at their own risk. In addition to the disclaimer above, the information does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. Any views and opinions expressed may be changed without an update.

See important Research Disclaimer.

Find articles by analysts