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'Ongoing Modern Transformation' Gets Sotheby's A Cowen Upgrade

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'Ongoing Modern Transformation' Gets Sotheby's A Cowen Upgrade

Cowen has upgraded Sothebys (NYSE: BID) to Outperform from Market Perform on improving business model and environment, sending its shares to a new 52-week high of $42.66.

Analyst's Commentary

“We like ongoing modern transformation underway, capital light agency business model, stabilizing margin profile, and favorable risk/reward given prospects of an improving art market,” analyst Oliver Chen wrote in a note.

Chen, who also raised the price target to $45 from $38, is encouraged by the auction commission margin improvement and improved sell-through rates that indicate healthy demand and prospects of acquiring superior inventory.

Justification

The analyst’s bullish thesis is reinforced by Sotheby's global brand and scale, secular growth in the auction business and potential benefit from additional regulatory factors.

Further, Sotheby’s top line is expected to strengthen from an overall global art market recovery, greater differentiation versus Christie's, expanding middle-market business and private sales.

Chen also noted that the pricing discipline and better fixed cost leverage should improve auction commission and operating margins.

“We view BID as a long-term global luxury idea given sustainable barriers to entry in a duopolistic art market — this is underscored by top notch brand equity and selling specialist capabilities,” Chen added.

At last check, shares of Sotheby’s had climbed 8.73 percent on the day to $41.74.

Image Credit: By Sothebys1744 (Own work) [CC BY-SA 4.0], via Wikimedia Commons

Latest Ratings for BID

DateFirmActionFromTo
Jan 2019DowngradesOutperformMarket Perform
Nov 2018UpgradesNeutralBuy
Mar 2018MaintainsOutperformOutperform

View More Analyst Ratings for BID
View the Latest Analyst Ratings

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