Bullish: Analysts Just Made A Notable Upgrade To Their Naked Wines plc (LON:WINE) Forecasts

Naked Wines plc (LON:WINE) shareholders will have a reason to smile today, with the analysts making substantial upgrades to this year's forecasts. The analysts greatly increased their revenue estimates, suggesting a stark improvement in business fundamentals. The market seems to be pricing in some improvement in the business too, with the stock up 9.8% over the past week, closing at UK£5.00. Could this big upgrade push the stock even higher?

Following the upgrade, the latest consensus from Naked Wines' five analysts is for revenues of UK£330m in 2021, which would reflect a huge 21% improvement in sales compared to the last 12 months. Losses are presumed to reduce, shrinking 18% from last year to UK£0.11. Yet prior to the latest estimates, the analysts had been forecasting revenues of UK£290m and losses of UK£0.14 per share in 2021. So there's been quite a change-up of views after the recent consensus updates, with the analysts making a sizeable increase to their revenue forecasts while also reducing the estimated loss as the business grows towards breakeven.

Check out our latest analysis for Naked Wines

The consensus price target rose 17% to UK£6.33, with the analysts encouraged by the higher revenue and lower forecast losses for this year. The consensus price target is just an average of individual analyst targets, so - it could be handy to see how wide the range of underlying estimates is. Currently, the most bullish analyst values Naked Wines at UK£7.90 per share, while the most bearish prices it at UK£4.20. This shows there is still some diversity in estimates, but analysts don't appear to be totally split on the stock as though it might be a success or failure situation.

Looking at the bigger picture now, one of the ways we can make sense of these forecasts is to see how they measure up against both past performance and industry growth estimates. For example, we noticed that Naked Wines' rate of growth is expected to accelerate meaningfully, with revenues forecast to grow 21%, well above its historical decline of 15% a year over the past five years. By contrast, our data suggests that other companies (with analyst coverage) in the industry are forecast to see their revenue grow 2.9% per year. So it looks like Naked Wines is expected to grow faster than its competitors, at least for a while.

The Bottom Line

The most important thing here is that analysts reduced their loss per share estimates for this year, reflecting increased optimism around Naked Wines' prospects. Fortunately, analysts also upgraded their revenue estimates, and our data indicates sales are expected to perform better than the wider market. With a serious upgrade to expectations and a rising price target, it might be time to take another look at Naked Wines.

Even so, the longer term trajectory of the business is much more important for the value creation of shareholders. We have estimates - from multiple Naked Wines analysts - going out to 2023, 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 upgrading their estimates. So you may also wish to search this free list of stocks that insiders are buying.

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This article by Simply Wall St is general in nature. 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.
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