Stock Analysis

Analysts Have Just Cut Their Westwing Comércio Varejista S.A. (BVMF:WEST3) Revenue Estimates By 12%

BOVESPA:WEST3
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One thing we could say about the analysts on Westwing Comércio Varejista S.A. (BVMF:WEST3) - they aren't optimistic, having just made a major negative revision to their near-term (statutory) forecasts for the organization. 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 consensus from Westwing Comércio Varejista's three analysts is for revenues of R$279m in 2022, which would reflect a perceptible 6.7% decline in sales compared to the last year of performance. Losses are predicted to fall substantially, shrinking 29% to R$0.29. However, before this estimates update, the consensus had been expecting revenues of R$318m and R$0.28 per share in losses. 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.

See our latest analysis for Westwing Comércio Varejista

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BOVESPA:WEST3 Earnings and Revenue Growth September 27th 2022

The consensus price target fell 27% to R$3.50, implicitly signalling that lower earnings per share are a leading indicator for Westwing Comércio Varejista's valuation. 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. The most optimistic Westwing Comércio Varejista analyst has a price target of R$4.00 per share, while the most pessimistic values it at R$2.80. 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 Westwing Comércio Varejista 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. Over the past year, revenues have declined around 0.08% annually. Worse, forecasts are essentially predicting the decline to accelerate, with the estimate for an annualised 13% decline in revenue until the end of 2022. By contrast, our data suggests that other companies (with analyst coverage) in a similar industry are forecast to see their revenue grow 14% per year. So it's pretty clear that, while it does have declining revenues, the analysts also expect Westwing Comércio Varejista to suffer worse than 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 Westwing Comércio Varejista. Regrettably, they also downgraded their revenue estimates, and the latest forecasts imply the business will grow sales slower than the wider market. Furthermore, there was a cut to the price target, suggesting that the latest news has led to more pessimism about the intrinsic value of the business. Given the stark change in sentiment, we'd understand if investors became more cautious on Westwing Comércio Varejista after today.

Still, the long-term prospects of the business are much more relevant than next year's earnings. We have estimates - from multiple Westwing Comércio Varejista analysts - going out to 2024, and you can see them 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.

Valuation is complex, but we're here to simplify it.

Discover if Westwing Comércio Varejista might be undervalued or overvalued with our detailed analysis, featuring fair value estimates, potential risks, dividends, insider trades, and its financial condition.

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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.