International auction company, Sothebys (NYSE:BID) named Patrick McClymont, former managing director of the investment banking at Goldman Sachs Group Inc (NYSE:GS) as new CFO to replace Bill Sheridan, who held the position over the past 17 years.
McClymont’s appointment received positive feedback from Wall Street analysts because of his broad experience in the financial sector. During his tenure at Goldman Sachs, McClymont provided advice to companies in different industry sectors, and served as the primary investment banking contact of Sothebys (NYSE:BID).
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Stifel analysts David A. Schick, Taylor G. LaBarr, and Raymond L. Stochel believed that McClymont could bring a new perspective to the international auction company because he has a “broad-based experience in strategic and financial advising” amid pressures to find opportunities to boost value for shareholders.
The analysts emphasized that an outsider from Wall Street like McClymont creates potential for structural change and management, which is necessary for Sothebys (NYSE:BID). They believed that going private is the best strategy for the company, consumers, employees, management and shareholders. In addition, they said, “We should not ignore the significant deal of experience that comes with an investment banker as CFO.”
Schick and his fellow analysts said Sothebys (NYSE:BID) is a super-cyclical and should be trading at the high-end, in the range of $20 to $80 (15x-20x EPS stress test range of $1.25-$4.00+). The projected trading price range for the company accounts for several factors, including revenue in China, better art cycle, more inflation mentality, private market transactions in luxury at 12X-14x EBITDA, approximately $700 million in real estate value, and backstop with activists [Daniel Loeb, Mick McGuire, and Nelson Peltz] who collectively owns almost a 16 percent stake in the company.
The analysts recommended a buy rating for the shares of Sothebys (NYSE:BID) with a $65 target price.
On the other hand, Wedbush analysts, Rommel Dionisio and Kurt Frederick noted that the pre-sale estimates for its upcoming auctions in the fourth quarter are encouraging at $272 to $365 million, higher than its $264 million sales in the same quarter a year earlier.
Sothebys obtained strong consignment deals
In addition, the analysts believed that Sotheby’s obtained strong consignment deals for its major auction in New York on November. Furthermore, Diosio and Frederick said Sothebys’ increased guarantee exposure will generate higher commission margins in the fourth quarter.
Dioniso and Fredrick maintained their outperform rating for the shares of Sothebys (NYSE:BID) and raised their price target from $49 to $54 per share.
Meanwhile, analysts at Citi Research Equities believed that the international auction company will evaluate and implement a combination of strategies that could drive its stock price higher. Some of the strategies include getting the headquarters sale lease back, monetization of accounts receivable, the return to selling of lower value lots, incremental leverage, and LBO/M&A, among others.
Sothebys is selling its headquarters in Manhattan
Citi Research Equities upgraded their rating for the shares of the company from neutral to buy and increased their price target from $45 to $55 per share.