Psst! Wanna buy some diamonds, cheap, over the Internet?
Shady as it sounds, this isn't the latest Nigerian e-mail scam -- it's the business model for Motley Fool Rule Breakers recommendation Blue Nile
What analysts say:
- Buy, sell, or waffle? Thirteen analysts take a loupe to Blue Nile, giving it two buy ratings, 11 holds, and no sells.
- Revenues. On average, they're looking for 25% quarterly sales growth to $113.3 million.
- Earnings. Profits should pace sales growth at 26%, or $0.44 per share.
What management says:
As fellow Fool Rick Munarriz relayed last month, Blue Nile threw us a curveball in January. In an effort to allay the fears of investors who had already heard bad news out of Tiffany
What management does:
Sales are nice, but what investors really want to see is profit -- so how's Blue Nile doing on that score? Judging from the table below, not half bad. Gross margins remain higher than 20%, rolling operating margins have risen for two quarters straight, and even the net bounced back last quarter.
Relative to other e-commerce stars, Blue Nile scores fatter operating margins than everything-including-the-kitchen-sink e-tailer Amazon.com
|
7/06 |
10/06 |
12/06 |
4/07 |
7/07 |
9/07 |
|
|---|---|---|---|---|---|---|
|
Gross |
21.1% |
20.6% |
20.2% |
20.0% |
20.2% |
20.2% |
|
Operating |
7.6% |
6.8% |
6.6% |
6.5% |
6.7% |
6.9% |
|
Net |
5.9% |
5.4% |
5.2% |
5.2% |
5.1% |
5.3% |
One Fool says:
Let no one say I'm not consistent. Against all the evidence and all the arguments to date, I remain convinced that Blue Nile's margins are going to take a fall next week. While analysts like Citigroup, which predicted a bumper crop of sales for Blue Nile late last year, have clearly been proven right, I can't help but think a key factor has been overlooked in how Blue Nile secured those sales.
As I wrote in "This Just In" back in December, Blue Nile was offering 20% discounts on any items up to $500 in value, paid for through eBay's PayPal service. That offer later switched over to the equivalent of a 50% discount on merchandise sold for $100 (or $50 off on pricier wares). Both offers were tailor-made to bump up sales at Blue Nile, and appear to have succeeded in spades. What remains to be seen, and what we'll focus on next week, is the question: "At what cost?"
