Blue Nile just sparkles with opportunity

An argument can be made that NILE's shares got well ahead of the company when the stock spiked through $100 earlier this year, but the sense here is that the selling has been overdone with NILE trading in the $70 range. Further, if Blue Nile exceeds Wall Street's holiday sales expectations, NILE's shares should become very popular again. The Reuters F2007/F2008 EPS consensus estimates for NILE are: $1.04/$1.32.

The risks? The U.S. economic slowdown would affect nearly all retailers. Further, the Q4 2007 shopping season - - a period when diamonds and other fine jewelry are purchased as gifts - - could see soft sales, as a result of U.S. consumers' concerns about the U.S. economy, and elevated energy prices.

The First Call mean rating for NILE is: Hold. [14 firms.] Mean 2008 target: $79.00. [high: $110, low: $60.]

Stock Analysis: Blue Nile is a moderate-risk stock not suitable for low-risk investors. More-conservative investors may wish to wait for a pull-back to about $60, but keep in mind that NILE may not pull-back to that level. Investors with an investment horizon longer than two years should be rewarded from NILE's shares. Sell / Stop Loss if you to purchase shares in this company: $44.

Disclosure: Lazzaro has no positions in stocks. In addition to private real estate holdings, he owns corporate and municipal bonds, and cash certificates of deposit.