Tiffany Shares Plunged: What You Need to Know

Updated

Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.

What: Shares of jewelry retailer Tiffany (NYS: TIF) sank 10% Tuesday after its current-quarter guidance missed Wall Street expectations.

So what: Tiffany's third-quarter earnings managed to wallop estimates, but a miss on its fourth-quarter outlook -- it now sees EPS of $1.48-$1.58, versus the consensus of $1.63 -- suggests that its recent breakneck sales growth is slowing. When you couple those top-line concerns with dipping gross margins, Tiffany's profitability seems to be under some significant pressure.

Now what: I wouldn't be so quick to pounce on this plunge. "We are, of course, mindful of continued short-term economic challenges and uncertainties in some markets," CEO Michael Kowalski said. But with a P/E of 21, even after today's pullback, Tiffany shares still don't have enough of those risks baked into the price.

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At the time thisarticle was published Fool contributor Brian Pacampara owns no position in any of the companies mentioned. Try any of our Foolish newsletter services free for 30 days.We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Fool's disclosure policy always gets a perfect score.

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