Stock Analysis

Analysts Have Lowered Expectations For Webjet Limited (ASX:WEB) After Its Latest Results

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Investors in Webjet Limited (ASX:WEB) had a good week, as its shares rose 6.3% to close at AU$4.93 following the release of its half-year results. The result was fairly weak overall, with revenues of AU$23m being 9.2% less than what the analysts had been modelling. Following the result, the analysts have updated their earnings model, and it would be good to know whether they think there's been a strong change in the company's prospects, or if it's business as usual. Readers will be glad to know we've aggregated the latest statutory forecasts to see whether the analysts have changed their mind on Webjet after the latest results.

See our latest analysis for Webjet

ASX:WEB Earnings and Revenue Growth February 18th 2021

Taking into account the latest results, the nine analysts covering Webjet provided consensus estimates of AU$67.8m revenue in 2021, which would reflect a measurable 5.3% decline on its sales over the past 12 months. Losses are predicted to fall substantially, shrinking 60% to AU$0.41. Before this latest report, the consensus had been expecting revenues of AU$83.4m and AU$0.30 per share in losses. There's been a definite change in sentiment in this update, with the analysts administering a notable cut to next year's revenue estimates, while at the same time increasing their loss per share forecasts.

The average price target lifted 12% to AU$4.72, clearly signalling that the weaker revenue and EPS outlook are not expected to weigh on the stock over the longer term. That's not the only conclusion we can draw from this data however, as some investors also like to consider the spread in estimates when evaluating analyst price targets. There are some variant perceptions on Webjet, with the most bullish analyst valuing it at AU$5.85 and the most bearish at AU$2.60 per share. Note the wide gap in analyst price targets? This implies to us that there is a fairly broad range of possible scenarios for the underlying business.

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. We would highlight that sales are expected to reverse, with the forecast 5.3% revenue decline a notable change from historical growth of 8.3% over the last five years. By contrast, our data suggests that other companies (with analyst coverage) in the same industry are forecast to see their revenue grow 22% annually for the foreseeable future. So although its revenues are forecast to shrink, this cloud does not come with a silver lining - Webjet is expected to lag the wider industry.

The Bottom Line

The most important thing to take away is that the analysts increased their loss per share estimates for next year. Unfortunately, they also downgraded their revenue estimates, and our data indicates revenues are expected to perform worse than the wider industry. Even so, earnings per share are more important to the intrinsic value of the business. We note an upgrade to the price target, suggesting that the analysts believes the intrinsic value of the business is likely to improve over time.

With that in mind, we wouldn't be too quick to come to a conclusion on Webjet. Long-term earnings power is much more important than next year's profits. We have estimates - from multiple Webjet analysts - going out to 2025, and you can see them free on our platform here.

And what about risks? Every company has them, and we've spotted 2 warning signs for Webjet you should know about.

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