Downgrade: Here's How Analysts See J D Wetherspoon plc (LON:JDW) Performing In The Near Term

Today is shaping up negative for J D Wetherspoon plc (LON:JDW) 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 twelve analysts covering J D Wetherspoon is for revenues of UK£1.2b in 2021, implying a definite 8.0% decline in sales compared to the last 12 months. The loss per share is anticipated to greatly reduce in the near future, narrowing 88% to UK£0.11. Before this latest update, the analysts had been forecasting revenues of UK£1.5b and earnings per share (EPS) of UK£0.16 in 2021. There looks to have been a major change in sentiment regarding J D Wetherspoon's prospects, with a sizeable cut to revenues and the analysts now forecasting a loss instead of a profit.

View our latest analysis for J D Wetherspoon

Analysts lifted their price target 5.2% to UK£11.28, implicitly signalling that lower earnings per share are not expected to have a longer-term impact on the stock's value. 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 J D Wetherspoon at UK£14.25 per share, while the most bearish prices it at UK£7.10. This is a fairly broad spread of estimates, suggesting that the analysts are forecasting a wide range of possible outcomes for the business.

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. These estimates imply that sales are expected to slow, with a forecast revenue decline of 8.0%, a significant reduction from annual growth of 1.6% 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 12% annually for the foreseeable future. It's pretty clear that J D Wetherspoon's revenues are expected to perform substantially worse than the wider industry.

The Bottom Line

The most important thing to take away is that analysts are expecting J D Wetherspoon to become unprofitable this year. Unfortunately analysts also downgraded their revenue estimates, and industry data suggests that J D Wetherspoon's revenues are expected to grow 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 J D Wetherspoon.

That said, the analysts might have good reason to be negative on J D Wetherspoon, given dilutive stock issuance over the past year. Learn more, and discover the 3 other risks we've identified, for free on our platform here.

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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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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