The analysts covering easyJet plc (LON:EZJ) delivered a dose of negativity to shareholders today, by making a substantial revision to their statutory forecasts for this year. This report focused on revenue estimates, and it looks as though the consensus view of the business has become substantially more conservative.
Following the latest downgrade, the 20 analysts covering easyJet provided consensus estimates of UK£2.1b revenue in 2021, which would reflect a sizeable 32% decline on its sales over the past 12 months. The loss per share is anticipated to greatly reduce in the near future, narrowing 44% to UK£1.48. Yet before this consensus update, the analysts had been forecasting revenues of UK£2.4b and losses of UK£1.37 per share in 2021. So there's been quite a change-up of views after the recent consensus updates, with the analysts making a serious cut to their revenue forecasts while also expecting losses per share to increase.
There was no major change to the consensus price target of UK£10.15, signalling that the business is performing roughly in line with expectations, despite lower earnings per share forecasts. It could also be instructive to look at the range of analyst estimates, to evaluate how different the outlier opinions are from the mean. There are some variant perceptions on easyJet, with the most bullish analyst valuing it at UK£13.40 and the most bearish at UK£6.00 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.
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. We would highlight that sales are expected to reverse, with a forecast 32% annualised revenue decline to the end of 2021. That is a notable change from historical growth of 3.8% 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 29% per year. It's pretty clear that easyJet'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 increased their loss per share estimates for this year. Unfortunately analysts also downgraded their revenue estimates, and industry data suggests that easyJet's revenues are expected to grow slower than the wider market. Overall, given the drastic downgrade to this year's forecasts, we'd be feeling a little more wary of easyJet going forwards.
As you can see, the analysts clearly aren't bullish, and there might be good reason for that. We've identified some potential issues with easyJet's financials, such as dilutive stock issuance over 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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