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Fly News Breaks for August 20, 2015
CSTE
Aug 20, 2015 | 09:42 EDT
Addressing a negative report on Caesarstone by short seller Spruce Point, Stifel says it is able to answer a few of Spruce's key points that are exaggerated or leave out pertinent information. Noting that Spruce accuses Caesarstoine of overstating its margins and of selling quartz to IKEA at lower than normal margins, Stifel says that Caesarstone obtains higher than normal margins based on the superiority of its products. Stifel doesn't believe that the company is selling its slabs to IKEA at lower margins. Spruce says that Caesarstone's quartz costs are rising, but the firm contends that the company's polyester costs, which are just as important as quartz costs,"are plunging." Spruce cites a lawsuit against the company that has exited for some time and has been fully disclosed, according to Stifel. Meanwhile, the company's stock is not trading at a much higher valuation than its peers, as Spruce alleges, and it is not surprising that two shareholders have sold the stock, given the shares' large jump, Stifel writes. Caesarstone's margins have reached a peak and should decline, but they will not drop due to lower premium prices, but based on a change in the company's mix, according to Stifel. The firm kept a $65 price target and Buy rating on Caesarstone but says it is reluctant to defend the stock since investors usually have a "sell first" reaction to negative reports.
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