The market looks tired Tuesday morning, with few big movers of interest and the session's gap-up opening mostly given back.
Breadth is still quite positive at around 4,000 advancers to 2,500 decliners, but new 52-week highs have declined a bit. Big-cap technology stocks are holding up fairly well -- with Apple (AAPL) doing much of the heavy lifting -- but the S&P 500 looks like it might fully return its opening gap and get back to flat for the session.
The biggest problem stocks face right now is that many names are extended technically on light volume and need some resets. However, the market never makes it that easy for us.
Yes, we have the typical speculative action in low-priced names like Avalon Holdings (AWX) , Affirmed NV (AFMD) and India Globalization Capital (IGC) , but that's narrow. The retail sector has cooled off lately, and we're seeing another example of a "sell-the-news" reaction in Tiffany & Co. (TIF) .
Here's my take on TIF:
Good Numbers, But a Hefty P/E
Tiffany put up some solid earnings numbers before the bell and popped some 6% on the opening, but has given most of that back as the morning has worn on.
The company beat analyst estimates on fiscal-second-quarter revenues, trounced earnings-per-share expectations by $0.16 and raised fiscal 2019 guidance to $4.65 to $4.80 from a previous $4.50 to $4.70. However, management cut guidance for the firm's fiscal third quarter, while TIF's 27x trailing price-to-earnings ratio means that the stock isn't particularly cheap.
Still, the company is beating analyst estimates, raising guidance and aims to grow EPS by about 15% through January 2020. The retailer's price-to-earnings-growth ratio (or "PEG") also isn't bad at around 2x.
In terms of technical analysis, TIF gapped up in May following its second-quarter earnings report, but has been in a $125-to-$140 trading range for a while. (It's at $130.59 as I write this.)
Some investors might look for an entry at this range's bottom, while those who prefer to buy relative strength might prefer to see a retest in the high $130s before trying to entry.
Overall, my take is that TIF posted solid numbers, but its valuation isn't attractive enough to generate sustained momentum unless the retail environment really continues to boom. Longer-term stockholders might be comfortable with the name, but it won't be very exciting in the short term.
Lots of Overextended Stocks
Finding good entry points in the overall market is tough right now, and TIF is a good example of this. It's hard to chase with so many things extended, so a little patience is warranted. I'll be looking for some new buys, but I don't expect to see many favorable opportunities on Tuesday.