Option Trade
Tiffany & Co. (NYSE:TIF) Calls
Monday, November 28, 2016

** OPTION TRADE: Buy the TIF JAN 20 2017 80.000 call at approximately $2.50. Place a pre-determined sell at $5.00.

Note: No protective stop losses added -- but if you wish to do so make it $1.00.

by Ian Harvey

Monday, November 28, 2016

Luxury jeweler Tiffany & Co. (NYSE:TIF) will report its third-quarter results before the market open tomorrow, November 29. The consensus calls for earnings of $0.67 per share on revenue of $925.66 million. During the same period last year the company earned $0.70 on sales of $938.2 million.

After a disappointing first half of the year, shares of TIF have trended higher during the second half of the year. Last quarter the company had sales that were slightly weaker than expected, but earnings were well above the consensus. The better than expected profit pushed the stock higher, with shares recently hitting a 52-week high shortly after the presidential election.

Expectations are high that a Trump presidency will be good for the overall economy, which in turn should benefit high-end retailers such as Tiffany.

 If Tiffany is able to post another earnings beat, the stock should continue to build on its recent momentum, and will likely hit a new 52-week high following the report.

The stock has a decent valuation, with a P/E of 21.9, and while earnings are expected to fall by 4.4% this year, conditions are expected to improve next year with 7.9% earnings growth. The street expects a good quarter. Analysts have a whisper number of $0.70 for the quarter, three pennies above the consensus.

The stock is up 3.5% on the year.

Tiffany & Co. has a 12-month low of $56.99 and a 12-month high of $81.89. The company has a market cap of $9.75 billion, a P/E ratio of 22.26 and a beta of 1.84. The firm has a 50-day moving average of $74.80 and a 200-day moving average of $67.86.

Why Tiffany?

Tiffany holds a prominent position in the global jewelry market by virtue of its distinctive brand appeal. It is believed that the company's omni-channel platform and store expansion programs bode well.

Retailers have been turning a bit of a corner and building some bullish momentum. This includes high-end jeweler Tiffany. Improved performance and pricing has the analysts moving to upgrade TIF shares ahead of their Nov. 29 earnings announcement.

The technical picture is stronger. After being charged by an upgrade and merger and acquisition rumors, TIF shares touched-up on the $82 price point. With the shares' 50- and 200-day trendlines moving higher below the stock, there is good reason to believe that the intermediate-term outlook will remain bullish.

Support for Tiffany at the $73 level is strong after a recent consolidation at that price, indicating that the downside potential for the upcoming earnings announcement is smaller than the potential move to the upside.

Also, Tiffany & Co., at the end of the third quarter, had a total of 33 hedge funds long this stock, an increase of 27% from one quarter earlier. With hedgies’ sentiment swirling, there exists a few notable hedge fund managers who were increasing their holdings significantly (or already accumulated large positions). TIF shareholders have witnessed an increase in enthusiasm from smart money lately.

Analyst Input

Oppenheimer’s Brian Nagel maintained an Outperform rating on Tiffany, while raising the price target from $80 to $87.

“In our view, TIF represents an established, yet still up-and-coming global luxury brand, with the potential to continue to successfully build consumer recognition in new and existing markets,” Nagel wrote.

Oppenheimer Holdings Inc.’s target price would indicate a potential upside of 9.88% from the company’s previous close.

Other equities research analysts also recently issued reports about the stock…..

  • Jefferies Group raised their target price on shares of Tiffany & Co. from $85.00 to $100.00 and gave the company a “buy” rating in a research note on Monday, November 14th.
  • Morgan Stanley reaffirmed a “hold” rating on shares of Tiffany & Co. in a research note on Monday, August 15th.
  • Mizuho raised their target price on shares of Tiffany & Co. from $72.00 to $82.00 and gave the company a “buy” rating in a research note on Tuesday, August 23rd.
  • Finally, Cowen and Company raised shares of Tiffany & Co. from a “market perform” rating to an “outperform” rating and raised their target price for the company from $74.00 to $90.00 in a research note on Friday, November 11th.

Two investment analysts have rated the stock with a sell rating, eleven have issued a hold rating, sixteen have issued a buy rating and one has assigned a strong buy rating to the company’s stock. Tiffany & Co. has a consensus rating of “Buy” and a consensus target price of $81.00.

Harvey’s Options Volatility Indicator

Conclusion

A positive earnings result for TIF will break through the resistance at $82 and target a move towards $90, while an earnings miss next week would likely be met by support and a retest of the $73 price followed by another round of bullish buying.

Therefore, based on the facts above, and Harvey’s Options Volatility Indicator, the following option trade is recommended…..

** OPTION TRADE: Buy the TIF JAN 20 2017 80.000 call at approximately $2.50. Place a pre-determined sell at $5.00.

Note: No protective stop losses added -- but if you wish to do so make it $1.00.

”Success is simple. Do what's right, the right way, at the right time.”

Option Tip for your Success!

Options traders are not successful because they win.

Options traders win because they are successful.

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