Tiffany & Co. Sees Share Downgraded and Price Target Slashed

High-end jeweler Tiffany & Co. has had its share downgraded to sell from hold and its stock price target reduced to $52 from $58, with an analyst saying the jewelry company's fundamentals do not line up with its high stock price.

Tiffany's stock price has climbed sharply this year despite disappointing holiday season sales, analyst Laura Champine of Canaccord Genuity says in a note to clients.

The $52 price target for Tiffany's share is more than 25 percent lower than its closing price on Friday of $70.25. The share has risen from around $59 since the start of the year.

The jewelry chain has also failed to meet earnings expectations for four consecutive quarters, Champine notes.

She also believes U.S. sales will carry on slowing due to recent tax hikes that could put a damper on purchases of luxury items. The additional taxes will slow sales to "the aspirational luxury consumer", Champine writes.

Tiffany & Co. shares have a dividend yield of around 1.8 percent based on the current closing price, and an annualized dividend payout of $1.28 per share.

Option buyers, whose actions provide a clear indication of what is happening in the market, show that put trading on Tiffany shares has grown slightly more popular over the past 10 weeks.

Meanwhile, another analyst company, Sterne Agee, initiated coverage on Tiffany & Co. with a neutral rating and a $68.00 price target.

Sterne Agee writes that while macro-economic pressures are "currently impacting top-line results (at the same time margins are peaking and compares get tough), we still feel that the group is set up favorably from here".

It said this was seasonally the best time to own retail stocks since March-April are the "best months historically", and near-term weakness "could potentially snap as refund checks hit the consumer's wallet and the weather potentially turns warmer (driving pent-up demand)”.

Holiday Season Sales

Tiffany & Co in January reported worldwide sales during the November-December 2012 holiday season up a modest 4 percent to $992 million.

And, due to uncertain general economic conditions in its major sales markets, Tiffany forecasts conservative sales growth for this year, with net earnings growth of 6-9 percent.

Sales at its famous Manhattan store, which accounts for almost nearly 10 percent of its total revenue, decreased by 2 percent, while sales in the Americas region climbed 3 percent to $516 million in the holiday period. Internet and catalog sales climbed 4 percent.

Meanwhile, in Asia, excluding Japan, they jumped 11 percent, when stripping out the impact of currency fluctuations while comparable store sales rose 7 percent. Sales fell 5 percent in Japan, but edged up one percent on a currency-neutral basis.

In Europe, there was a 2-percent rise in sales.