Tiffany Gets A Shiny New Price Target At Jefferies

Tiffany & Co. (NYSE: TIF) shares could get a big boost from improving margins in coming quarters. Jefferies analyst Randal Konik is so positive about the opportunity for Tiffany that he has raised the firm’s price target for the Buy-rated stock from $85 to $100.

“We remain confident in the story and ongoing fashion jewelry improvement given margin/EPS upside,” Konik explains.

Looking ahead, he sees five major tailwinds for Tiffany:

• 1. Improvement in the fashion jewelry market
• 2. Abating tourism headwinds
• 3. Low input costs flow-through
• 4. Expanding brand loyalty
• 5. Multiple expansion in-line with peers

Konik believes silver will drive Tiffany’s margins as high as 63 percent by fiscal 2019.

According to earnings calls from retailers such as Coach Inc (NYSE: COH), Macy’s Inc (NYSE: M) and Ralph Lauren Corp (NYSE: RL), tourism inflows have improves slightly since Q2. Konik points out that tourism has historically demonstrated a positive correlation with Tiffany same-store sales.

From a valuation standpoint, Tiffany’s current share price includes a NTM PE of about 20x. That puts Tiffany at a significant discount to its luxury peer group, which trades at a multiple of around 26x.

Jefferies has upped its fiscal 2019 EPS estimate to $4.60.