Revenue Downgrade: Here's What Analysts Forecast For Global Fashion Group S.A. (ETR:GFG)

The analysts covering Global Fashion Group S.A. (ETR:GFG) delivered a dose of negativity to shareholders today, by making a substantial revision to their statutory forecasts for next year. This report focused on revenue estimates, and it looks as though the consensus view of the business has become substantially more conservative. The stock price has risen 7.3% to €1.33 over the past week. It will be interesting to see if this downgrade motivates investors to start selling their holdings.

After the downgrade, the consensus from Global Fashion Group's seven analysts is for revenues of €1.4b in 2023, which would reflect an uneasy 16% decline in sales compared to the last year of performance. Per-share losses are expected to creep up to €0.52. Yet before this consensus update, the analysts had been forecasting revenues of €1.7b and losses of €0.49 per share in 2023. Ergo, there's been a clear change in sentiment, with the analysts administering a notable cut to next year's revenue estimates, while at the same time increasing their loss per share forecasts.

Check out our latest analysis for Global Fashion Group

There was no major change to the consensus price target of €2.21, signalling that the business is performing roughly in line with expectations, despite lower earnings per share forecasts. 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 Global Fashion Group, with the most bullish analyst valuing it at €5.00 and the most bearish at €1.00 per share. 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.

Another way we can view these estimates is in the context of the bigger picture, such as how the forecasts stack up against past performance, and whether forecasts are more or less bullish relative to other companies in the industry. 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 9.4% over the last three years. By contrast, our data suggests that other companies (with analyst coverage) in the same industry are forecast to see their revenue grow 13% annually for the foreseeable future. It's pretty clear that Global Fashion Group's revenues are expected to perform substantially 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 next year, suggesting all may not be well at Global Fashion Group. Unfortunately analysts also downgraded their revenue estimates, and industry data suggests that Global Fashion Group's revenues are expected to grow slower than the wider market. Often, one downgrade can set off a daisy-chain of cuts, especially if an industry is in decline. So we wouldn't be surprised if the market became a lot more cautious on Global Fashion Group after today.

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 Global Fashion Group going out to 2025, 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.

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.