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power breakfast at tiffany\'s; initiating with $115 target

by:Keke Jewelry     2020-05-22
I\'m the founder of Tiffany. (NYSE:TIF)with a DCF-
Support the $115 price target, which means that it will rise 15% in the next 12 months from Friday\'s close.
TIF is still the top brand in the world of jewelry with huge pricing and brand assets.
The company\'s unique business area enables it to leverage all levels of consumer revenue.
I look forward to high-
End products are a key driver of lower price elasticity in high-income groups, and this view is consistent with my paper on QSRs in North America (
Link: North American QSRs: avoid the low end and stick to the high end).
Finally, I believe that Asia will continue to be a key driving force for the discipline as disposable income increases and brand awareness increases.
Although existing brands such as Chow Tai Fook and Lao Fengxiang have a slightly higher historical profile in the region, I hope that young professionals with better knowledge of Western brands will be able to drive TIF\'s revenue growth in the region.
I expect revenue to grow at a compound growth rate of 12% over the next five years, driven mainly by Asia and other emerging markets (mid to high-teen growth)
North America and Japan are expected to grow in the medium termsingle digit.
I expect the operating profit margin to reach 25% with the help of higher margin fashion products and lower operating expenses to increase brand awareness.
My target price of $115 is based on 5-
The annual DCF model assumes that WACC % is 9% and the terminal multiple is 24x.
Diversified Growth tif is one of the few jewellery companies in the world, and thanks to the unique positioning of its four business units, it is able to capture consumer income groups at all levels without having to risk brand dilution, 1)
Fashion jewelry, 2)
Engagement jewelry, 3)high-
End the \"statement\" jewelry and 4)accessories.
As of 2013, the mixing ratio between the four plates was 40%/30%/23%/7%, respectively.
In my opinion, fashion jewelry is essential for TIF to attract entry
Level jewelry buyers give them points$500 price tag.
I think the choice of gold, silver and designer products is suitable for the university (
Even high school)
Students gradually engage with the TIF brand so that they may trade to a higher price
When they climb the income ladder, they end the product.
The authors of this note can question the trading experience from the University-era TIF silver collection to the early Atlas collection on Wall Street.
On the other hand, if TIF does not introduce a lower
In my opinion, such a shift and brand participation will not happen.
Although the profit margin of the fashion jewelry market is higher than that of other business units and has the potential to attract entry --
The level of jewelry buyers, I see a higher levelend (
But lower gross margin)
Statements and participation are in part key drivers for the future, as high-income groups are less price sensitive and wealth is growing in emerging markets and Asia.
As I pointed out in the North American QSR launch note, the decline in overall employment rates in the United States masks serious underemployment issues, which can be explained by the decline in median household income since the financial crisis.
The middle class is likely to cut spending, but I expect
The ultimate-oriented company with global growth risks will go through the trough, and TIF certainly fits this feature.
I am particularly active in the engagement section, which is most likely a key driver for TIF to have a strong brand asset in this vertical field with a superior shopping experience and proven quality.
However, I also see the statement lineup as the main beneficiary of emerging wealth trends outside North America.
I note that sales from Asia are gaining momentum, accounting for 38% of TIF FY13 sales, compared to 11% five years ago.
China will boost TIF\'s Asian expansion and China\'s share of TIF\'s Asia-Pacific region will exceed half.
Sales and sales in Japan have been accelerating as the number of stores increases ((
26 at the end of 2013)
Brand awareness.
Management expects the number of stores to double over time and plans to open stores in Hangzhou
Alibaba\'s two city homes show TIF\'s brand awareness outside the front line1 cities (ie.
Beijing, Shanghai, Guangzhou, Shenzhen)
Smooth progress.
I think there are more benefits to store expansion because TIF is still in the early stages of growth in China and there is little competition with Western brands.
Although existing brands such as Chow Tai Fook and Lao Fengxiang may intensify the competitive environment, I continue to see TIF have better (and global)
Brand advantage over local brands.
Value TIF with DCF-
The price target for support was $115, which meant a 15% increase on Friday\'s close. I forecast a 5-
Annual compound revenue growth rate of 12% driven by high
Terminal product line and sales from Asia.
I also expect fashion jewelry to maintain a stable gross margin, while after TIF has accumulated a solid brand awareness outside of North America, EBIT will increase to 25% due to reduced investment in operating expenses.
My DCF model assumes 9% WACC (
Equity cost 11%, debt cost 4%)
A terminal multiple of 24 x with a price target of $115 per share.
Disclosure: The author does not hold any positions in any of the stocks mentioned, and does not have a plan to start any positions within the next 72 hours.
The author wrote this article himself and expressed his views.
The author was not compensated (
In addition to Seeking Alpha).
The author has no business relationship with any company mentioned in this article.
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