Diamond prices, which make up the bulk of the company's costs, were much higher in 2011, and Swinand believes this is directly affecting Tiffany's valuation, which was 21 prior to today's decline. Its valuation, or PE ratio based on 2012 estimated earnings, is now 17.7.
Yet other luxury retailers such as Coach and Ralph Lauren are trading around 21. Swinand, however, doesn't expect Tiffany's to outperform its peers.
"Tiffany's valuation was ahead of itself. Its tough to get a 21 to 23 multiple when you're only growing the topline at 6 or 7 percent," he adds.
Swinand's price target is $50, which means he expects the company to lose a quarter of its current market capitalization— currently $8.5 billion.
"It's not that I'm so pessimistic on Tiffany, its just that this summer's increases were really what was driving the sales," he told CNBC. "A lot of the sales increase has been due to pricing."
CNBC Data Pages:
Paul Swinand does not own Tiffany stock. Morningstar's editorial policy prohibits analysts from holding positions in the companies they cover.