The latest analyst coverage could presage a bad day for Dufry AG (VTX:DUFN), with the analysts making across-the-board cuts to their statutory estimates that might leave shareholders a little shell-shocked. Revenue estimates were cut sharply as analysts signalled a weaker outlook - perhaps a sign that investors should temper their expectations as well. At CHF63.12, shares are up 6.2% in the past 7 days. Investors could be forgiven for changing their mind on the business following the downgrade; but it's not clear if the revised forecasts will lead to selling activity.
Following the latest downgrade, the current consensus, from the ten analysts covering Dufry, is for revenues of CHF2.6b in 2020, which would reflect a disturbing 59% reduction in Dufry's sales over the past 12 months. Losses are supposed to balloon 34% to CHF21.71 per share. Yet prior to the latest estimates, the analysts had been forecasting revenues of CHF2.9b and losses of CHF20.78 per share in 2020. 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.
The consensus price target lifted 12% to CHF57.24, clearly signalling that the weaker revenue and EPS outlook are not expected to weigh on the stock over the longer term. 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. There are some variant perceptions on Dufry, with the most bullish analyst valuing it at CHF70.00 and the most bearish at CHF20.00 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. These estimates imply that sales are expected to slow, with a forecast annualised revenue decline of 83% by the end of 2020. This indicates a significant reduction from annual growth of 6.1% 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 7.7% per year. So although its revenues are forecast to shrink, this cloud does not come with a silver lining - Dufry is expected to lag the wider industry.
The Bottom Line
The most important thing to take away is that analysts increased their loss per share estimates for this year. Regrettably, they also downgraded their revenue estimates, and the latest forecasts imply the business will grow sales slower than the wider market. There was also an increase in the price target, suggesting that there is more optimism baked into the forecasts than there was previously. Overall, given the drastic downgrade to this year's forecasts, we'd be feeling a little more wary of Dufry going forwards.
There might be good reason for analyst bearishness towards Dufry, like major dilution from new stock issuance in the past year. Learn more, and discover the 2 other concerns we've identified, 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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