This commentary on the press reaction to Sotheby's earnings report is available to AMMpro subscribers. Monthly subscriptions come with a free first month grace period. Subscribers are welcome to sign up for the service and cancel at any time before they are billed.

Update:  Since this analysis was published, Sotheby's stock (BID) has broken through the $50 floor that had previously been a ceiling for the stock price. Today it suffered further even as the broader market went up. It was also revealed in Marcato Capital's 13F filing released today that the activist hedge fund is now down to a small ownership stake below 2% of the shares. Marcato owned 6.6m shares at its height and is now down to 860k, down some 80+%.

There's a lot to say about Sotheby's most recent earnings call. In the week of trading since Sotheby's released its second quarter earnings, the stock has dropped a full 10%, the classic market definition of a correction. In another post, we will look closely at Sotheby's earnings and what the current quarter and six-month reporting suggests about whether this is an actual correction of a stock that got a little ahead of itself before, eventually, proceeding higher or a peak of unsustainable momentum.

As the chart above shows, even with the 10% correction, Sotheby's stock price remains 25% higher than before the February earnings call. What BID gave back the week after the flat numbers came back was excessive enthusiasm. The stock first took off in late February after the Q4 earnings announcement and its strong increase in commission margins. The stock had previously seen its value cut in half on earlier earnings call where it the then-CFO warned 2015's fourth quarter would see greatly diminished auction margins due to the conditions of the Taubman sale.

Starting at $40, the same point where CEO Tad Smith had joined the firm in 2015, BID advanced to nearly $48, a price slightly above the top tick achieved under Smith's leadership. During the May conference call, Sotheby's offered a number of metrics meant to show real progress in its efforts to transform the company digitally. Sell-side analysts bought into management's vision of the company and the stock rose further as the Spring auction season made headlines for Sotheby's team.