Tiffany & Co. (TIF) PT Range Raised at Wells Fargo Following Solid Q3 But Remains 'Underperform'

Wells Fargo analyst Ike Boruchow raised his valuation range on Tiffany & Co. (NYSE: TIF) to $70-$72 (from $64-$66) following "solid" Q3 results but maintained an Underperform rating.

Boruchow commented, "TIF’s Q3 print was solid. While expectations had been coming up over the past several months (on the view that global luxury was beginning to improve), TIF was able to match those expectations with better comps and EPS. The single biggest driver of upside (vs. our model) came out of Japan – which handily beat our estimate (comps +2% vs. our -8% estimate) as its business sequentially improved (from -3% to +2%) at a time when other luxury goods companies saw 3-4 point slowdowns. All in, there are clearly positives out of this release: 1) worldwide comps are improving (and beat), 2) TIF’s refocused fashion product (especially in the sub $500 silver category) appears to be resonating, 3) Japan bucked the general slower luxury trend and 4) easier compares and a lowered bar could setup a holiday beat in Q4. On the flip side, bears could argue: 1) sales missed in both Europe (ongoing weakness outside the U.K.) and Asia-Pac (remain negative everywhere outside of China), 2) Gross margin (GM; which has averaged 200bps+ expansion the past several quarters) was only +90bps (missed our +125bps estimate), 3) management called out adverse effects from the election related activity outside its NYC Flagship (20% of U.S. sales) that could linger through Q4 and beyond and 4) the implied Q4 EPS guide came down to $1.35 (Street was at $1.46). While Q3 was better, forward visibility remains a bit clouded, and following a meaningful re-rating of shares over the past few months (TIF +40% vs. SPX +10%) we feel like the risk/reward remains unfavorable. Should top line continue to improve through the holidays, with further stability across key regions, then we likely would need to re-evaluate our stance. For now, we reiterate our Underperform. Raising FY16/FY17 EPS estimates to $3.69/$3.74 (from $3.68/$3.52) and valuation range to $70-$72 (from $64-$66)."

For an analyst ratings summary and ratings history on Tiffany & Co. click here. For more ratings news on Tiffany & Co. click here.

Shares of Tiffany & Co. closed at $78.14 yesterday.

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