Is Tiffany & Co. Getting Ready to Break Out?

With shares of Tiffany & Co. (NYSE:TIF) trading around $77, is TIF an OUTPERFORM, WAIT AND SEE or STAY AWAY? Let’s analyze the stock with the relevant sections of our CHEAT SHEET investing framework:

T = Trends for a Stock’s Movement

Tiffany & Co. engages in the design, manufacture, and retail of jewelry worldwide. The company operates through Americas, Asia-Pacific, Japan, Europe, and Other segments. Its jewelry products include fine and solitaire jewelry; diamond engagement rings and wedding bands to brides and grooms; and non-gemstone, sterling silver, gold, metal, and platinum jewelry. Tiffany & Co. also sells timepieces, leather goods, sterling silver goods, china, crystal, stationery, fragrances, and accessories. The products sold by Tiffany & Co. are seeing increased demand as consumers around the world look to distinguish themselves from others. Jewelry and designer products give many consumers a sense of satisfaction and happiness that may be everlasting. Look for the products marketed by the company to continue to see rising demand and profits as consumers worldwide opt for this popular brand.

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T = Technicals on the Stock Chart are Strong

Tiffany & Co. stock has seen a consistent uptrend since its initial public offering in 2006. The stock has made new all-time highs just about every year and looks to be headed there this year as well. Analyzing the price trend and its strength can be done using key simple moving averages. What are the key moving averages? The 50-day (pink), 100-day (blue), and 200-day (yellow) simple moving averages. As seen in the daily price chart below, Tiffany & Co. is trading above its rising key averages which signal neutral to bullish price action in the near-term.

TIF

(Source: Thinkorswim)

Taking a look at the implied volatility (red) and implied volatility skew levels of Tiffany & Co. options may help determine if investors are bullish, neutral, or bearish.

Implied Volatility (IV)

30-Day IV Percentile

90-Day IV Percentile

Tiffany & Co. Options

27.09%

16%

15%

What does this mean? This means that investors or traders are buying a minimal amount of call and put options contracts, as compared to the last 30 and 90 trading days.

Put IV Skew

Call IV Skew

July Options

Flat

Average

August Options

Flat

Average

As of today, there is an average demand from call buyers or sellers and low demand by put buyers or high demand by put sellers, all neutral to bullish over the next two months. To summarize, investors are buying a minimal amount of call and put option contracts and are leaning neutral to bullish over the next two months.

On the next page, let’s take a look at the earnings and revenue growth rates and the conclusion.

E = Earnings Are Increasing Quarter-Over-Quarter

Rising stock prices are often strongly correlated with rising earnings and revenue growth rates. Also, the last four quarterly earnings announcement reactions help gauge investor sentiment on Tiffany & Co.’s stock. What do the last four quarterly earnings and revenue growth (Y-O-Y) figures for Tiffany & Co. look like and more importantly, how did the markets like these numbers?

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2013 Q1

2012 Q4

2012 Q3

2012 Q2

Earnings Growth (Y-O-Y)

9.37%

0.98%

-30%

4.35%

Revenue Growth (Y-O-Y)

9.32%

4.07%

3.77%

1.59%

Earnings Reaction

3.94%

1.94%

-6.16%

7.19%

Tiffany & Co. has seen increasing earnings and revenue figures over the last four quarters. From these numbers, the markets have been pleased with Tiffany & Co.’s recent earnings announcements.

P = Excellent Relative Performance Versus Peers and Sector

How has Tiffany & Co. stock done relative to its peers, Zale (NASDAQ:EXPE), Blue Nile (NASDAQ:TRIP), LJ International (NASDAQ:TZOO), and sector?

Tiffany & Co.

Zale

Blue Nile

LJ International

Sector

Year-to-Date Return

34.08%

118.5%

-3.61%

8.33%

19.47%

Tiffany & Co. has been a relative performance leader, year-to-date.

Conclusion

Tiffany & Co. provides valuable and highly demand products to a large group of consumers around the world. The stock has been a strong performer for investors in recent years and is now consolidating near all-time high prices. Over the last four quarters, earnings and revenue figures have been on a steady rise which has pleased investors in the company. Relative to its peers and sector, Tiffany & Co. has been a year-to-date performance leader. Look for Tiffany & Co. stock to OUTPERFORM

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