Famed jewelry operator Tiffany & Co (TIF) reported better-than-expected results for its first quarter on Wednesday, then added a little extra shimmer by raising its guidance for fiscal 2014. The result was a leap higher in TIF stock, and another pending opportunity for the bulls.
The numbers: Tiffany earnings came to 97 cents per share to trounce the consensus estimate of 77 cents. Meanwhile, the top line of $1.01 billion was enough to hurdle analyst estimates for $955.05 million. Comparable-store sales rose 11% year-over-year, which resulted in net income of $126 million, much better than the $84 million earned in the year-ago quarter.
What furthermore enticed TIF stock bulls was the breakdown in Tiffany’s sales by region — namely, the company saw good growth in each region.
And the topping on the cake: Tiffany raised its guidance for 2014 from $4.05-$4.15 up to $4.15-$4.25. Analyst consensus estimates for the full year were below $4.20 per share.
As a result of the upbeat results and outlook, TIF stock didn’t hold back and rallied more than 9% on Wednesday, closing at fresh all-time highs.
While I want to refrain from drawing too many parallels between luxury clothing retailer Nordstrom (JWN) and Tiffany, it is noteworthy that JWN stock last Friday also rallied to new all-time highs after showing great sales growth. It is interesting to see luxury goods retailers execute this well in a difficult environment, which certainly goes against what consensus believes.
But the smart money has long caught on to this. In October 2008, I sat through a presentation by a major hedge funder who at the time made his case for buying Tiffany, pointing to many factors, including (and most importantly) that the target audience for its products is growing, not shrinking.
TIF Stock Charts
Looking at the multiyear chart of TIF stock, the hedgie was most certainly proven right (much to the astonishment of many in the audience, judging by the looks he received about his bull case on Tiffany). With Wednesday’s rally, which came on a big spike in volume, Tiffany shares have powered through yet another technical resistance layer and likely caused a few more nonbelievers to cover their short positions.
On the daily chart below, note how nicely TIF stock cleared its multimonth band of resistance (blue line) on Wednesday. This came after the stock held its late 2012 uptrend (black line), as well as its 200-day moving average (red line).
From here, while TIF stock might be overbought in the immediate term, the path of least resistance still points higher.
Quick hitters (and quick hitters only) should try to buy the stock on a move above its Wednesday highs near $97.40, while active investors should wait for the stock to build a higher base and consolidate Wednesday’s gains somewhat.
Ultimately, barring any quick reversal of Wednesday’s gains and bearish posture, TIF stock should have upside toward the $102 mark.
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Download Serge’s trading plan in the Essence of Swing Trading e-book here. As of this writing, he did not hold a position in any of the aforementioned securities.
