Looking For "Value" In Blue Nile (NILE)

Blue Nile Inc. (NASDAQ: NILE) has been battered during the recession.  While its woes may be far from over, it seems that at least one analyst is trying to call a bottom.

Citigroup’s Mark Mahaney raised Blue Nile to “Buy” from “Hold”  this morning.  Mahaney believes that shares have fallen so far that they now represent a good value.  The online jewelry seller recently went almost as low as $18.00, and that is off about two-thirds from $56.00 over the last year and off over 80% from the $100+ highs of the last year.

Now that diamond prices have softened and his belief that fundamental macro-trends are likely to get “less worse,” Mahaney believes the time has come to buy.

This is a gutsy call considering what lies ahead.  We have seen many analyst calls go south when they are based upon price alone.  This one is not based solely upon price. We would also caution that the company itself refused to give annual guidance when it released earnings last week.

Shares are up over 6% at $22.55 on light trading volume this morning.

Jon C. Ogg
February 23, 2009