Albert Fried & Company Upgrades SFX Entertainment (SFXE) to Overweight

Albert Fried & Company upgraded SFX Entertainment (NASDAQ: SFXE) from Market Perform to Overweight with a price target of $5. Analyst Rich Tullo noted upside to CEO Bob Sillerman's bid and strong Q2 revenue.

"We think SFXE’s management and board of directors should be embarrassed for letting the share price decline and not pre-announce results at the conclusion of the go shop period," said Tullo. "We think opaque transparency contributed to the SFXE share decline to the all time low, $2.36, and can only conclude SFXE has an agenda which does not include maximizing shareholder value in the near term."

"So why are we upgrading SFXE shares? We think 2Q15 revenue was strong enough to support a SFX tender. We think some financial institutions will look at +35% GAAP revenue growth and conclude SFXE is attractive. While Bob Sillerman says he does not need the money he has taken money from investors and sold them shares at below market prices prior to the end of the Go Shop. Maybe we are simpletons but people who don’t need money generally don’t front run a tender and sell discounted stock. SFX also has negative balance sheet fundamentals as deferred revenue declined, payables and royalty payables expanded. The aggressive cash management likely over estimates SFX’s balance sheet cash by roughly $30 million," continued the analyst.

Tullo added, "To be very clear, the risk to our upgrade is Bob Sillerman does not provide his documents on time and comes back to the board with a lower price. The only incentive Bob Sillerman has is to take ethically correct action and the recent $200 million lawsuit says at least one former partner of Bob’s questions his business ethos. Thus we now outline the risk as clear and as bluntly as possible."

For an analyst ratings summary and ratings history on SFX Entertainment click here. For more ratings news on SFX Entertainment click here.

Shares of SFX Entertainment closed at $2.36 yesterday.

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