Looking East for Future Tiffany Sparkle

Following a quarterly report from Tiffany that outshined Wall Street estimates on Tuesday, one KeyBanc Capital Markets analyst named Japan and China as two markets that could be powerful growth drivers ahead for the luxury retailer.

Edward Yruma of KeyBanc listed the company's strong performance in its Japanese business, which saw a 21-percent increase in same-store sales on a constant-exchange-rate basis, as one of the biggest surprises of Tiffany's earnings report. He said this was "really phenomenal" in light of the country's weak economy.

"If the Japanese government is successful in stimulating that economy, this is a business that could be very, very powerful for Tiffany," he said.

A still from The Great Gatsby film showing off Tiffany's Great Gatsby Collection Savoy Headpiece.
Source: The Great Gatsby | Warner Bros.
A still from The Great Gatsby film showing off Tiffany's Great Gatsby Collection Savoy Headpiece.

Yruma has a "buy" rating on the company's shares along with a $75 price target, slightly lower than its price after ticking higher in intraday trade on Tuesday. He said his firm would be reviewing its target soon.

He told CNBC's "Squawk on the Street" that he sees continued demand from China for the luxury brand.

"We think at this stage, the business is small enough that it can continue to grow in China and that can be a powerful growth driver in China over the next couple years," he said.

Despite the earnings and revenue beats, the company reaffirmed its fiscal 2013 earnings forecast on Tuesday—a smart move, said Liz Dunn, a consumer sector senior analyst at Macquarie Capital.

"I think that they need to remain cautious and conservative in their guidance," Dunn said. "They had a rough go of it last year where they had to bring down guidance several times, and I think investors want to see them be conservative. I think that's appropriate."

Dunn has a "neutral" rating on the company's stock and a $69 price target but said "it's a great company for the longer term, and I certainly understand why some people are buying it here."

Still, the fine jewelry retailer may be trading "a little bit ahead of fundamentals," she said.

-By CNBC's Katie Little. Follow her @KatieLittle

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