Barron’s analyst Tiernan Ray says SELL Blue Nile.

Track his picks at:

http://trackthepros.com/

IN TIME, SHARES OF ONLINE JEWELER Blue Nile should turn from a lump of coal into a gem. Just don’t expect the magical transformation to happen anytime soon.

a. After a 50% decline in Blue Nile’s shares in the last 12 months, there could still be substantial downside as the contours of the U.S. economic downturn continue to come to light.

b. As consumers file for unemployment compensation in rising numbers, see their home values continue to retreat, and put up with lower lines of credit, they’re increasingly ratcheting down their purchases of discretionary items such as the baubles that Blue Nile sells.

c. the stock trades at an eye-popping 33 times next year’s expected earnings per share, even after its collapse.

d. To make matters worse, there’s new competition for investors’ attention.  Zales,