Analysts Have Lowered Expectations For Koolearn Technology Holding Limited (HKG:1797) After Its Latest Results

Shareholders of Koolearn Technology Holding Limited (HKG:1797) will be pleased this week, given that the stock price is up 17% to HK$26.00 following its latest half-yearly results. Revenues were CN¥677m, and Koolearn Technology Holding was a dismal 12% short of estimates. The analysts typically update their forecasts at each earnings report, and we can judge from their estimates whether their view of the company has changed or if there are any new concerns to be aware of. So we gathered the latest post-earnings forecasts to see what estimates suggest is in store for next year.

View our latest analysis for Koolearn Technology Holding

After the latest results, the 23 analysts covering Koolearn Technology Holding are now predicting revenues of CN¥1.56b in 2021. If met, this would reflect a sizeable 31% improvement in sales compared to the last 12 months. Losses are supposed to decline, shrinking 18% from last year to CN¥1.18. Before this earnings announcement, the analysts had been modelling revenues of CN¥1.75b and losses of CN¥1.08 per share in 2021. There's been a definite change in sentiment in this update, with the analysts administering a notable cut to next year's revenue estimates, while at the same time increasing their loss per share forecasts.

The average price target was broadly unchanged at CN¥30.71, perhaps implicitly signalling that the weaker earnings outlook is not expected to have a long-term impact on the valuation. 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. There are some variant perceptions on Koolearn Technology Holding, with the most bullish analyst valuing it at CN¥54.40 and the most bearish at CN¥17.96 per share. We would probably assign less value to the analyst 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 the consensus price target, as it is just an average and analysts clearly have some deeply divergent views on the business.

One way to get more context on these forecasts is to look at how they compare to both past performance, and how other companies in the same industry are performing. It's clear from the latest estimates that Koolearn Technology Holding's rate of growth is expected to accelerate meaningfully, with the forecast 31% revenue growth noticeably faster than its historical growth of 18% over the past year. By contrast, our data suggests that other companies (with analyst coverage) in a similar industry are forecast to grow their revenue at 22% per year. It seems obvious that, while the growth outlook is brighter than the recent past, the analysts also expect Koolearn Technology Holding to grow faster than the wider industry.

The Bottom Line

The most important thing to note is the forecast of increased losses next year, suggesting all may not be well at Koolearn Technology Holding. They also downgraded their revenue estimates, although industry data suggests that Koolearn Technology Holding's revenues are expected to grow faster than the wider industry. There was no real change to the consensus price target, suggesting that the intrinsic value of the business has not undergone any major changes with the latest estimates.

Keeping that in mind, we still think that the longer term trajectory of the business is much more important for investors to consider. We have forecasts for Koolearn Technology Holding going out to 2025, and you can see them free on our platform here.

Don't forget that there may still be risks. For instance, we've identified 3 warning signs for Koolearn Technology Holding that you should be aware of.

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