As part of his bear position, Chuck Saletta raises two interesting points about Blue Nile
There's no question that purchasing high-end jewelry is an economically sensitive activity -- probably more so than with other consumer goods. Sure enough, Signet
Meanwhile, given its lack of overhead costs and its ability to underprice the competition, Blue Nile should be the likely beneficiary of such challenging economic conditions. Consumers who once might have been inclined to go with a name-brand purchase from a jeweler such as Tiffany
As for valuation, Blue Nile's price-to-earnings ratio is quite high, but it's a growth stock. Fortunately for shareholders, the company's forecasts have tended to be on the conservative side. So when the company announces its earnings on Nov. 6, I would not be taken aback by an "earnings surprise" that comes in above current estimates.
The recent valuation concerns that have contributed to analyst "sell" recommendations on this stock, such as the one Citigroup
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Blue Nile is a current pick in Rule Breakers and a former recommendation in Motley Fool Hidden Gems.