These Analysts Think Air Arabia PJSC's (DFM:AIRARABIA) Sales Are Under Threat

The latest analyst coverage could presage a bad day for Air Arabia PJSC (DFM:AIRARABIA), with the analysts making across-the-board cuts to their statutory estimates that might leave shareholders a little shell-shocked. There was a fairly draconian cut to their revenue estimates, perhaps an implicit admission that previous forecasts were much too optimistic.

After the downgrade, the six analysts covering Air Arabia PJSC are now predicting revenues of د.إ2.9b in 2021. If met, this would reflect a major 91% improvement in sales compared to the last 12 months. Before the latest update, the analysts were foreseeing د.إ3.3b of revenue in 2021. The consensus view seems to have become more pessimistic on Air Arabia PJSC, noting the measurable cut to revenue estimates in this update.

View our latest analysis for Air Arabia PJSC

We'd point out that there was no major changes to their price target of د.إ1.44, suggesting the latest estimates were not enough to shift their view on the value of the business. There's another way to think about price targets though, and that's to look at the range of price targets put forward by analysts, because a wide range of estimates could suggest a diverse view on possible outcomes for the business. The most optimistic Air Arabia PJSC analyst has a price target of د.إ1.69 per share, while the most pessimistic values it at د.إ1.00. Analysts definitely have varying views on the business, but the spread of estimates is not wide enough in our view to suggest that extreme outcomes could await Air Arabia PJSC shareholders.

Taking a look at the bigger picture now, one of the ways we can understand these forecasts is to see how they compare to both past performance and industry growth estimates. For example, we noticed that Air Arabia PJSC's rate of growth is expected to accelerate meaningfully, with revenues forecast to exhibit 138% growth to the end of 2021 on an annualised basis. That is well above its historical decline of 5.1% a year over the past five years. Compare this against analyst estimates for the broader industry, which suggest that (in aggregate) industry revenues are expected to grow 24% annually. So it looks like Air Arabia PJSC is expected to grow faster than its competitors, at least for a while.

The Bottom Line

The most important thing to take away is that analysts cut their revenue estimates for this year. The analysts also expect revenues to grow faster than the wider market. Given the stark change in sentiment, we'd understand if investors became more cautious on Air Arabia PJSC after today.

Still got questions? At least one of Air Arabia PJSC's six analysts has provided estimates out to 2025, which can be seen for free on our platform here.

Of course, seeing company management invest large sums of money in a stock can be just as useful as knowing whether analysts are downgrading their estimates. So you may also wish to search this free list of stocks that insiders are buying.

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