Tongcheng Travel Holdings Limited (HKG:780) Analysts Are Reducing Their Forecasts For This Year

Market forces rained on the parade of Tongcheng Travel Holdings Limited (HKG:780) shareholders today, when the analysts downgraded their forecasts for this year. Both revenue and earnings per share (EPS) forecasts went under the knife, suggesting analysts have soured majorly on the business.

Following the latest downgrade, the current consensus, from the 20 analysts covering Tongcheng Travel Holdings, is for revenues of CN¥7.3b in 2022, which would reflect a discernible 5.0% reduction in Tongcheng Travel Holdings' sales over the past 12 months. Statutory earnings per share are supposed to nosedive 21% to CN¥0.23 in the same period. Before this latest update, the analysts had been forecasting revenues of CN¥8.2b and earnings per share (EPS) of CN¥0.33 in 2022. Indeed, we can see that the analysts are a lot more bearish about Tongcheng Travel Holdings' prospects, administering a substantial drop in revenue estimates and slashing their EPS estimates to boot.

Check out our latest analysis for Tongcheng Travel Holdings

Despite the cuts to forecast earnings, there was no real change to the CN¥14.93 price target, showing that the analysts don't think the changes have a meaningful impact on its intrinsic value. Fixating on a single price target can be unwise though, since the consensus target is effectively the average of analyst price targets. As a result, some investors like to look at the range of estimates to see if there are any diverging opinions on the company's valuation. Currently, the most bullish analyst values Tongcheng Travel Holdings at CN¥20.62 per share, while the most bearish prices it at CN¥15.21. Analysts definitely have varying views on the business, but the spread of estimates is not wide enough in our view to suggest that extreme outcomes could await Tongcheng Travel Holdings shareholders.

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 6.6% annualised revenue decline to the end of 2022. That is a notable change from historical growth of 4.4% over the last three years. By contrast, our data suggests that other companies (with analyst coverage) in the same industry are forecast to see their revenue grow 25% annually for the foreseeable future. It's pretty clear that Tongcheng Travel Holdings' 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. Regrettably, they also downgraded their revenue estimates, and the latest forecasts imply the business will grow sales slower than 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 Tongcheng Travel Holdings 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 Tongcheng Travel Holdings going out to 2024, and you can see them free on our platform here.

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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.