Stock Analysis

Bearish: Analysts Just Cut Their Webjet Limited (ASX:WEB) Revenue and EPS estimates

  •  Updated
ASX:WEB
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Today is shaping up negative for Webjet Limited (ASX:WEB) 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 downgrade, the consensus from eight analysts covering Webjet is for revenues of AU$94m in 2021, implying a substantial 65% decline in sales compared to the last 12 months. The loss per share is anticipated to greatly reduce in the near future, narrowing 64% to AU$0.30. Yet prior to the latest estimates, the analysts had been forecasting revenues of AU$109m and losses of AU$0.25 per share in 2021. So there's been quite a change-up of views after the recent consensus updates, with the analysts making a serious cut to their revenue forecasts while also expecting losses per share to increase.

Check out our latest analysis for Webjet

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ASX:WEB Earnings and Revenue Growth January 28th 2021

Analysts lifted their price target 6.8% to AU$4.21, implicitly signalling that lower earnings per share are not expected to have a longer-term impact on the stock's value. 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. There are some variant perceptions on Webjet, with the most bullish analyst valuing it at AU$5.52 and the most bearish at AU$2.70 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 65% revenue decline a notable change from historical growth of 22% 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 23% 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 note from this downgrade is that the consensus increased its forecast losses this year, suggesting all may not be well at Webjet. Regrettably, they also downgraded their revenue estimates, and the latest forecasts imply the business will grow sales slower than the wider market. The rising price target is a puzzle, but still - with a serious cut to this year's outlook, we wouldn't be surprised if investors were a bit wary of Webjet.

There might be good reason for analyst bearishness towards Webjet, like major dilution from new stock issuance in the past year. For more information, you can click here to discover this and the 1 other warning sign we've identified.

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.

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