Analysts Have Just Cut Their Guotai Junan International Holdings Limited (HKG:1788) Revenue Estimates By 31%

Today is shaping up negative for Guotai Junan International Holdings Limited (HKG:1788) 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.

Following the downgrade, the latest consensus from Guotai Junan International Holdings' three analysts is for revenues of HK$2.7b in 2022, which would reflect a substantial 28% improvement in sales compared to the last 12 months. Before the latest update, the analysts were foreseeing HK$3.9b of revenue in 2022. The consensus view seems to have become more pessimistic on Guotai Junan International Holdings, noting the pretty serious reduction to revenue estimates in this update.

See our latest analysis for Guotai Junan International Holdings

Notably, the analysts have cut their price target 17% to HK$1.32, suggesting concerns around Guotai Junan International Holdings' valuation. 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. The most optimistic Guotai Junan International Holdings analyst has a price target of HK$2.20 per share, while the most pessimistic values it at HK$0.80. We would probably assign less value to the 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 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 Guotai Junan International Holdings' growth to accelerate, with the forecast 28% annualised growth to the end of 2022 ranking favourably alongside historical growth of 5.9% per annum over the past five years. By contrast, our data suggests that other companies (with analyst coverage) in a similar industry are forecast to grow their revenue at 16% per year. It seems obvious that, while the growth outlook is brighter than the recent past, the analysts also expect Guotai Junan International Holdings to grow faster than the wider industry.

The Bottom Line

The clear low-light was that analysts slashing their revenue forecasts for Guotai Junan International Holdings this year. They're also forecasting more rapid revenue growth 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 Guotai Junan International Holdings' future valuation. Overall, given the drastic downgrade to this year's forecasts, we'd be feeling a little more wary of Guotai Junan International Holdings going forwards.

Unanswered questions? We have estimates for Guotai Junan International Holdings from its three analysts out until 2024, 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.