Cowen Advises Clients to Buy Sotheby’s Shares Predicting 2017 Upturn

The analyst raised its rating on the house's shares.

The sale room at Sotheby's. Courtesy Sotheby's.

The financial services company Cowen has raised its rating on Sotheby’s shares, predicting that the company will improve its performance in 2017.

In a note to clients, analyst Oliver Chen set Sotheby’s new price target at $45 a share, and advised clients to buy Sotheby’s stocks based on the auction house’s “ongoing modern transformation underway, capital light agency business model, stabilizing margin profile, and favorable risk/reward given prospects of an improving art market.”

According to Nasdaq, the announcement prompted a 10 percent surge in the auction house’s share price around noon on Friday as investor confidence was buoyed by the prospect of rising share prices.

“BID’s stabilizing auction commission margin profile indicates that the pricing environment and discipline appears under control,” Chen continued. “We view BID as a long-term luxury idea given sustainable barriers to entry in a duopolistic art market. This is underscored by top notch brand equity and selling specialist capabilities.”

Analysts predict Sotheby's stock will rise in 2017. Photo: John Moore/Getty Images.

Analysts predict Sotheby’s stock will rise in 2017. Photo: John Moore/Getty Images.

Cowen’s rating increase contradicts predictions by art market experts who questioned Sotheby’s strategic acquisitions in 2016, including the notable $50 million takeover of Amy Cappellazzo and Allan Schwartzman’s boutique advisory firm Art Agency Partners, the Mei Moses price index, and art fraud lab Orion Analytical.

On the other hand, the house has been blighted by the departure of a number of high-profile staffers throughout 2016, reflecting a serious loss of institutional memory in a market that is built on personal relationships.

“The market is difficult,” Guillaume Cerutti, newly-appointed CEO of arch-rival Christie’s told the Financial Times, adding that his priority is “convincing clients to sell. It is our responsibility to make them confident.”

Although Sotheby’s sales results have remained solid, without being spectacular, in 2016, questions remain over whether the auction house will be able to instill the confidence into their clients to part with their prized artworks.

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