While Fools should generally take the opinion of Wall Street with a grain of salt, it's not a bad idea to take a closer look at particularly stock-shaking upgrades and downgrades -- just in case their reasoning behind the call makes sense.
What: Shares of Sotheby's (BID) climbed 2% in early trading after Citigroup upgraded the auction house to "buy" from "neutral."
So what: Along with the upgrade, analyst Oliver Chen boosted his price target on the stock to $55 per share (from $45), representing about 16% worth of upside to yesterday's close. Chen cited several potential catalysts for the call, including the potential sale of its headquarters, a return of capital to shareholders, and even a possible leveraged buyout.
Now what: At the very minimum, I expect management to make some strategic tweaks and start focusing on less expensive goods. "Sotheby's current focus on high-end property may leave the company vulnerable to competition on commission margins and sellers of high-end property could be more likely to leave the market during pullbacks which exposes Sotheby's to greater volatility," Chen said. So while the stock is hitting a new 52-week high today, Citigroup's price target doesn't seem all that unreasonable given the many number of potential catalysts working in Sotheby's favor.
