Why Tiffany & Co. Shares Shone Bright This Morning

While Fools should generally take the opinion of Wall Street with a grain of salt, it's not a bad idea to take a closer look at particularly stock-shaking upgrades and downgrades -- just in case their reasoning behind the call makes sense.

What: Shares of Tiffany (NYSE: TIF  ) climbed 2% this morning after Goldman Sachs upgraded the jewelry retailer from neutral to conviction buy.

So what: Along with the upgrade, analyst Lindsay Drucker Mann raised her price target to $105 (from $97), representing about 19% worth of upside to yesterday's close. While value investors might be turned off by Tiffany's steady share-price climb in 2013, Mann believes there's plenty of room to run given its still-improving fundamentals.

Now what: Goldman now sees Tiffany earning $4.52 per share in 2015 and $5.25 in 2016, up respectively from $4.50 and $5.12. "TIF is a top idea into year-end and early 2014 based on near-term upside to both gross margin and free-cash expectations, as well as sustained quality sales momentum," noted Goldman. "TIF's underlying EPS and cash generation power have been masked in recent years by headwinds that are now reversing. These include cost inflation, delayed price actions, and cash investments in fixed assets and inventory." Of course, with the stock now up more than 60% from its 52-week lows and trading at a 25-plus P/E, it's hard to believe that those tailwinds aren't already baked into the valuation.

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