Why Sotheby's (BID) Stock Is Down Today

NEW YORK (TheStreet) -- Shares of Sotheby's (BID) are down -4.51% to $38.57 during its spring auction season.

Sotheby's and Daniel S. Loeb, the activist hedge fund manager, declared a truce in one of the most bitter corporate fights in recent memory, the New York Times reports.

After a long proxy battle, the auction house agreed to give  Loeb and two allies the board seats they had been seeking and to allow his firm, Third Point, to increase its stake to 15%.

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Officials at Christie's, Sotheby's archrival, are said to have used Sotheby's troubles in the competition to win art to sell this season. If they did, it worked, the Times said.

On Tuesday, Christie's held contemporary art auctions topped expectations, selling nearly $745 million worth in less than three hours on Tuesday alone.

But despite having eight more works than the Christie's auction this week, Sotheby's sale on Wednesday only managed less than half as much in sales on Tuesday, totaling $364.3 million, just above its low $336.7 million estimate, according to the Times.

TheStreet Ratings team rates SOTHEBY'S as a Hold with a ratings score of C. TheStreet Ratings Team has this to say about their recommendation:

"We rate SOTHEBY'S (BID) a HOLD. The primary factors that have impacted our rating are mixed some indicating strength, some showing weaknesses, with little evidence to justify the expectation of either a positive or negative performance for this stock relative to most other stocks. The company's strengths can be seen in multiple areas, such as its robust revenue growth, increase in stock price during the past year and impressive record of earnings per share growth. However, as a counter to these strengths, we find that we feel that the company's cash flow from its operations has been weak overall."

Highlights from the analysis by TheStreet Ratings Team goes as follows:

  • BID's very impressive revenue growth greatly exceeded the industry average of 2.9%. Since the same quarter one year prior, revenues leaped by 54.1%. Growth in the company's revenue appears to have helped boost the earnings per share.
  • Compared to where it was a year ago today, the stock is now trading at a higher level, reflecting both the market's overall trend during that period and the fact that the company's earnings growth has been robust. Despite the fact that it has already risen in the past year, there is currently no conclusive evidence that warrants the purchase or sale of this stock.
  • BID's debt-to-equity ratio of 0.88 is somewhat low overall, but it is high when compared to the industry average, implying that the management of the debt levels should be evaluated further. Despite the fact that BID's debt-to-equity ratio is mixed in its results, the company's quick ratio of 1.80 is high and demonstrates strong liquidity.
  • The company, on the basis of net income growth from the same quarter one year ago, has significantly underperformed compared to the Diversified Consumer Services industry average, but is greater than that of the S&P 500. The net income increased by 72.6% when compared to the same quarter one year prior, rising from -$22.35 million to -$6.11 million.
  • Net operating cash flow has significantly decreased to -$268.13 million or 61.44% when compared to the same quarter last year. In addition, when comparing to the industry average, the firm's growth rate is much lower.
  • You can view the full analysis from the report here: BID Ratings Report

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