Analysts Just Shaved Their Kogan.com Ltd (ASX:KGN) Forecasts Dramatically

Today is shaping up negative for Kogan.com Ltd (ASX:KGN) shareholders, with the analysts delivering a substantial negative revision to this year's forecasts. Revenue and earnings per share (EPS) forecasts were both revised downwards, with analysts seeing grey clouds on the horizon.

Following the latest downgrade, the current consensus, from the nine analysts covering Kogan.com, is for revenues of AU$624m in 2023, which would reflect a considerable 13% reduction in Kogan.com's sales over the past 12 months. The loss per share is anticipated to greatly reduce in the near future, narrowing 64% to AU$0.12. Yet before this consensus update, the analysts had been forecasting revenues of AU$703m and losses of AU$0.045 per share in 2023. Ergo, there's been a clear change in sentiment, with the analysts administering a notable cut to this year's revenue estimates, while at the same time increasing their loss per share forecasts.

Check out our latest analysis for Kogan.com

The consensus price target fell 7.6% to AU$4.34, implicitly signalling that lower earnings per share are a leading indicator for Kogan.com's valuation. Fixating on a single price target can be unwise though, since the consensus target is effectively the average of analyst price targets. As a result, some investors like to look at the range of estimates to see if there are any diverging opinions on the company's valuation. Currently, the most bullish analyst values Kogan.com at AU$11.70 per share, while the most bearish prices it at AU$2.73. With such a wide range in price targets, the analysts are almost certainly betting on widely diverse outcomes for the underlying business. With this in mind, we wouldn't rely too heavily on the consensus price target, as it is just an average and analysts clearly have some deeply divergent views on the business.

Of course, another way to look at these forecasts is to place them into context against the industry itself. These estimates imply that sales are expected to slow, with a forecast annualised revenue decline of 13% by the end of 2023. This indicates a significant reduction from annual growth of 19% over the last five years. Compare this with our data, which suggests that other companies in the same industry are, in aggregate, expected to see their revenue grow 11% per year. So although its revenues are forecast to shrink, this cloud does not come with a silver lining - Kogan.com is expected to lag the wider industry.

The Bottom Line

The most important thing to note from this downgrade is that the consensus increased its forecast losses this year, suggesting all may not be well at Kogan.com. Unfortunately analysts also downgraded their revenue estimates, and industry data suggests that Kogan.com's revenues are expected to grow slower than the wider market. After such a stark change in sentiment from analysts, we'd understand if readers now felt a bit wary of Kogan.com.

Even so, the longer term trajectory of the business is much more important for the value creation of shareholders. At Simply Wall St, we have a full range of analyst estimates for Kogan.com going out to 2025, and you can see them free on our platform here.

Another way to search for interesting companies that could be reaching an inflection point is to track whether management are buying or selling, with our free list of growing companies that insiders are buying.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.