Ahead of the Bell: analyst upgrades Blue Nile

NEW YORK - An analyst lifted Blue Nile Inc.'s rating Friday, citing the online jewelry retailer's appealing stock price.

Jack Murphy of William Blair & Co. said the Seattle-based company has been hindered by softening demand and the ongoing consumer spending pullback during the recession. While he foresees curtailed spending continuing for the rest of the year, Murphy adds that sector consolidation will help Blue Nile's performance.

"With an improving competitive position, we believe that Blue Nile will capitalize on a substantial growth opportunity in the core U.S. business and internationally," he wrote in a client note.

The company may also be able to take advantage of declining diamond prices and easier comparisons that start in the third quarter, Murphy added.

The analyst raised Blue Nile to "Outperform" from "Market Perform."

Shares of Blue Nile closed Thursday at $37.69.

Copyright 2009 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.