Diamonds may have been a girl's best friend in the past, but it looks like the two have had a falling-out.

American Technology Research analyst Tim Boyd is drastically slashing his holiday-quarter targets for online jeweler Blue Nile (NASDAQ:NILE), after channel checks confirm an increasingly gloomy short-term outlook.

According to Boyd, his contacts at real-world jewelers are posting sharp drops in store traffic this season. Given shoppers' steady migration to the Internet, that isn't necessarily bad news for Blue Nile. Business could be booming at Expedia (NASDAQ:EXPE), for example, even when your local travel agency is a ghost town.

However, Boyd then turns to comScore's traffic data, showing that unique visitors to Blue Nile's site supposedly fell by 46% in October, and 60% in November. Another of Boyd's contacts points out that couples are postponing engagement plans, given the soft economy and hazy job market. That's bad news for site operators like The Knot (NASDAQ:KNOT) and Martha Stewart Living (NYSE:MSO), which thrive on helping happy couples plan weddings. But it's even worse for Blue Nile, given the site's reputation as a source for diamond engagement rings.

Boyd's new take is that Blue Nile will earn $0.32 a share, on $77.8 million in revenue, this quarter. That's a far cry from the $0.45 a share in earnings and $111.9 million in sales the site posted during last year's fourth quarter. It's also well short of Wall Street's expectations of $0.38 a share in profits, on $100.4 million in revenue.

However, Boyd's channel checks also don't bode well for real-world jewelers like Tiffany (NYSE:TIF). Lower-end Internet jewelers like Bidz (NASDAQ:BIDZ) and Overstock.com (NASDAQ:OSTK) may also be susceptible, though they're likely better-positioned to cash in on folks resorting to deals on bling this holiday season.

Either way, after posting dips in stateside sales during each of this year's first three quarters, Blue Nile seems headed for a real stinker as it stumbles toward the 2008 finish line.

The silver lining here: Boyd's watered-down 2009 outlook, calling for the company to earn $0.89 a share next year, is actually in line with the rest of the market. That certainly isn't enough to justify the stock's current share price if results continue to disappoint. But it might provide a nice springboard once brides-to-be and diamond rings patch up their currently rocky friendship. 

Other Blue clues:

Blue Nile and The Knot are Motley Fool Rule Breakers recommendations. Try any of our Foolish newsletters today, free for 30 days.

Longtime Fool contributor Rick Munarriz got married years before TheKnot.com was around; if it had been, maybe he'd have found a more punctual videographer. He does not own shares in any of the companies in this story. He is also part of the Rule Breakers newsletter research team, seeking out tomorrow's ultimate growth stocks a day early. The Fool has a disclosure policy.