Koolearn Technology Holding Limited (HKG:1797) Analysts Are Reducing Their Forecasts For This Year

Today is shaping up negative for Koolearn Technology Holding Limited (HKG:1797) shareholders, with the analysts delivering a substantial negative revision to this year's forecasts. Both revenue and earnings per share (EPS) forecasts went under the knife, suggesting analysts have soured majorly on the business. Surprisingly the share price has been buoyant, rising 12% to HK$28.00 in the past 7 days. It will be interesting to see if the downgrade has an impact on buying demand for the company's shares.

Following the downgrade, the latest consensus from Koolearn Technology Holding's 23 analysts is for revenues of CN¥1.5b in 2021, which would reflect a sizeable 27% improvement in sales compared to the last 12 months. Losses are presumed to reduce, shrinking 12% from last year to CN¥1.25. Yet before this consensus update, the analysts had been forecasting revenues of CN¥1.7b and losses of CN¥1.09 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.

Check out our latest analysis for Koolearn Technology Holding

There was no major change to the consensus price target of CN¥30.76, 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. Currently, the most bullish analyst values Koolearn Technology Holding at CN¥54.41 per share, while the most bearish prices it at CN¥18.00. So we wouldn't be assigning too much credibility to analyst price targets in this case, because there are clearly some widely differing views on what kind of performance this business can generate. 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.

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. The analysts are definitely expecting Koolearn Technology Holding's growth to accelerate, with the forecast 27% growth ranking favourably alongside historical growth of 18% per annum over the past year. Compare this with other companies in the same industry, which are forecast to grow their revenue 22% next year. Factoring in the forecast acceleration in revenue, it's pretty clear that Koolearn Technology Holding is expected to grow at about the same rate as 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. There was also a drop in their revenue estimates, although as we saw earlier, forecast growth is only expected to be about the same as the wider market. We're also surprised to see that the price target went unchanged. Still, deteriorating business conditions (assuming accurate forecasts!) can be a leading indicator for the stock price, so we wouldn't blame investors for being more cautious on Koolearn Technology Holding after the downgrade.

Even so, the longer term trajectory of the business is much more important for the value creation of shareholders. At Simply Wall St, we have a full range of analyst estimates for Koolearn Technology Holding going out to 2025, 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. 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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