Funding Circle Holdings plc (LON:FCH) Analysts Just Trimmed Their Revenue Forecasts By 10%

Today is shaping up negative for Funding Circle Holdings plc (LON:FCH) shareholders, with the analysts delivering a substantial negative revision to this year's forecasts. There was a fairly draconian cut to their revenue estimates, perhaps an implicit admission that previous forecasts were much too optimistic.

Following the downgrade, the most recent consensus for Funding Circle Holdings from its four analysts is for revenues of UK£181m in 2020 which, if met, would be a decent 15% increase on its sales over the past 12 months. Prior to the latest estimates, the analysts were forecasting revenues of UK£201m in 2020. It looks like forecasts have become a fair bit less optimistic on Funding Circle Holdings, given the measurable cut to revenue estimates.

See our latest analysis for Funding Circle Holdings

Notably, the analysts have cut their price target 21% to UK£1.23, suggesting concerns around Funding Circle Holdings's valuation. 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. There are some variant perceptions on Funding Circle Holdings, with the most bullish analyst valuing it at UK£1.84 and the most bearish at UK£0.55 per share. We would probably assign less value to the forecasts in this situation, because such a wide range of estimates could imply that the future of this business is difficult to value accurately. 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.

These estimates are interesting, but it can be useful to paint some more broad strokes when seeing how forecasts compare, both to the Funding Circle Holdings's past performance and to peers in the same industry. It's pretty clear that there is an expectation that Funding Circle Holdings's revenue growth will slow down substantially, with revenues next year expected to grow 15%, compared to a historical growth rate of 30% over the past five years. Juxtapose this against the other companies in the industry with analyst coverage, which are forecast to grow their revenues (in aggregate) 12% next year. Factoring in the forecast slowdown in growth, it looks like Funding Circle Holdings is forecast to grow at about the same rate as the wider industry.

The Bottom Line

The clear low-light was that analysts slashing their revenue forecasts for Funding Circle Holdings this year. The analysts also expect revenues to grow approximately in line with 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. 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 Funding Circle Holdings after today.

Looking to learn more? We have estimates for Funding Circle Holdings from its four analysts out until 2022, 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.

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