UFB ! NILE Dumped not Pumped by Bambi !
Blue Nile flows lower- American Technology Group initiates with 'sell' rating
By Bambi Francisco, CBS.MarketWatch.com
Last Update: 10:43 AM ET Jun 16, 2004
SAN FRANCISCO (CBS.MW) -- Blue Nile, an online diamond retailer and a recent Internet IPO darling, saw shares come under pressure Wednesday after an analyst initiated coverage with a "sell" rating. Mark Mahaney, an Internet analyst at American Technology Research, told clients the key factors behind his negative opinion ranged from increasing competition, markedly decelerating growth rates and margin pressure, high valuation and limited international exposure. Blue Nile shares (NILE) fell 5 percent to $34. While the stock is still up from its IPO price of $20.50 on May 20, shares are off an intraday high of $41.70 struck on June 4. In early June, investors were cautioned about the high valuation, decelerating growth rates and margin pressure concerns in this column. See previous Net Stocks. About 90 percent of Blue Nile's top-selling items can be found on other sites, Mahaney noted. Tiffany, Zale (ZLC), Amazon.com (AMZN), eBay (EBAY) and Wal-Mart (WMT) were among the competitors that Mahaney, and others, including Blue Nile itself, have cited. There are also companies like J.C. Penney (JCP), the more than 100-year-old department store, which sells made-to-order engagement rings online. Blue Nile does generate about 10 percent of its sales from international markets, Mahaney pointed out. A glass-half-empty outlook would consider this negative given that the international markets are growing faster than the U.S. Mahaney estimates that international markets are growing two to three times the U.S. growth rates. However, a glass-half-full outlook could be that the international markets present opportunity.
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