Analysts Have Just Cut Their Skyworth Group Limited (HKG:751) Revenue Estimates By 10%

Today is shaping up negative for Skyworth Group Limited (HKG:751) 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. At HK$4.04, shares are up 7.7% in the past 7 days. We'd be curious to see if the downgrade is enough to reverse investor sentiment on the business.

After the downgrade, the consensus from Skyworth Group's twin analysts is for revenues of CN¥50b in 2022, which would reflect a discernible 4.3% decline in sales compared to the last year of performance. Statutory earnings per share are anticipated to decline 12% to CN¥0.53 in the same period. Before this latest update, the analysts had been forecasting revenues of CN¥56b and earnings per share (EPS) of CN¥0.57 in 2022. It looks like analyst sentiment has fallen somewhat in this update, with a substantial drop in revenue estimates and a small dip in earnings per share numbers as well.

View our latest analysis for Skyworth Group

It'll come as no surprise then, to learn that the analysts have cut their price target 17% to HK$4.19. That's not the only conclusion we can draw from this data however, as some investors also like to consider the spread in estimates when evaluating analyst price targets. Currently, the most bullish analyst values Skyworth Group at HK$5.17 per share, while the most bearish prices it at HK$3.20. 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.

Of course, another way to look at these forecasts is to place them into context against the industry itself. These estimates imply that sales are expected to slow, with a forecast annualised revenue decline of 4.3% by the end of 2022. This indicates a significant reduction from annual growth of 6.2% 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 13% per year. It's pretty clear that Skyworth Group'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 cut their earnings per share estimates, expecting a clear decline in business conditions. Unfortunately analysts also downgraded their revenue estimates, and industry data suggests that Skyworth Group's revenues are expected to grow slower than the wider market. The consensus price target fell measurably, with analysts seemingly not reassured by recent business developments, leading to a lower estimate of Skyworth Group's future valuation. 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 Skyworth Group after today.

Still, the long-term prospects of the business are much more relevant than next year's earnings. We have analyst estimates for Skyworth Group going out as far as 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 downgrading 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. 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.