While earnings were acceptable, the guidance is horrible.  For the first quarter of 2008, Blue Nile expects $0.11 to $0.14 EPS on relatively flat net sales compared to the Q1-2007 sales of $67.91 million.  Those won’t cut it, and even though we have been critical about traders not pricing in any slowdown this is just painful.  First Call has estimates at $0.23 EPS on $82.2 million.  Ouch!

Blue Nile also made a key change that analysts and traders don’t like, particularly as the economy is softening.  It named President Diane Irvine to the additional role of CEO to replace Mark Vadon, who was named executive chairman.

• One value manager recently noted the chances for much higher prices at THE VALUE INVESTING CONGRESS, although that is looking farther and farther from reality as of today.

This one is uglier than a leathery neck in after-hours trading. Shares closed down 2.5% today at $53.85 in regular trading and shares are down 21% to $42.43 in after-hours trading.  The 52-week trading range is $37.85 to $106.16.

Blue Nile authorized an additional $100 million to repurchase shares of its common stock over the next 24 months and that takes the total approved buyback plan up to $150 million.  That may help stabilize the stock ahead when it chooses to buy stock on weakness, but it’s doing nothing today as investors don’t really think of web retailers as being big buyers of their own shares. 

Jon C. Ogg
February 12, 2008

Current estimates from First Call are $0.18 on revenues of $67.15 million.  If it offers guidance the next quarter estimates are $0.14 & $62.9 million and Fiscal Dec-2007 estimates are $0.91 and $306 million.  So it still trades at more than 80-times forward estimates.  The fact that the company has been able to deliver steady upside has helped the incredible performance.

As far as analyst calls, most analysts have price targets south of the current stock price.  The chart is still a bullish one a longer-term basis and depending on your timeframe could allow the stock to drop another $6.00 to $10.00 before any serious technical trouble on a long-term trendline.  Short-term is a much different story, so keep your timeframe in mind.  Options traders are braced for nearly a 10% move in the stock in either direction today, although the open interest has been light in its options.  Shares are up roughly 100% since the start of last quarter.

One last thing to watch for is the good old stock split.  The short interest in July was up again at more than 2.6 million shares, close to 10-days trading volume.  Blue Nile’s market cap is now more than $1.2 Billion after its last run-up. 

Jon C. Ogg
August 6, 2007

Jon Ogg can be reached at jonogg@247wallst.com; he does not own securities in the companies he covers.