Sotheby's Shares Sink for Second Day as Analysts Lower Targets

  • Auction house declines more than 7% on profit concerns
  • Revenue from Taubman sale not expected until early 2016

Shares of Sotheby’s dropped the most in more than three months after analysts lowered profit targets amid auctions of the works in the A. Alfred Taubman estate.

Sotheby’s shares fell 7.5 percent to $29.61 at 12:27 a.m. in New York, after dropping 6.1 percent on Monday, when the company reported third-quarter earnings. The shares are down 31 percent for the year.

Analysts warned of lower fourth-quarter profits after the company said on Monday that it won’t report revenue from the sales of more than 500 works from the Taubman estate until they exceed Sotheby’s $515 million in guarantees to sellers. The company needs to generate an additional $95 million in sales and commissions to cover the guarantees, and that may not happen until the first quarter of 2016, Sotheby’s said.

"The timing of Taubman revenue and commission will likely wreak havoc with optics," Stifel analyst David Schick wrote in a research note on Monday that lowered his target price for the stock to $38 from $50.

On Tuesday, Craig-Hallum Capital Group analyst George Sutton lowered his price target for the stock to $34 from $40, and called the accounting treatment of the Taubman guarantee "surprising."

Last week, Sotheby’s began sales of works culled from the collection of Taubman, the former chairman who died in April. Sotheby’s sold $420 million of art from the collection during two auctions last week.

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