The analyst covering BAIOO Family Interactive Limited (HKG:2100) delivered a dose of negativity to shareholders today, by making a substantial revision to their statutory forecasts for this year. Both revenue and earnings per share (EPS) forecasts went under the knife, suggesting the analyst has soured majorly on the business.
Following the downgrade, the consensus from lone analyst covering BAIOO Family Interactive is for revenues of CN¥904m in 2021, implying an uncomfortable 8.8% decline in sales compared to the last 12 months. Statutory earnings per share are anticipated to drop 18% to CN¥0.05 in the same period. Previously, the analyst had been modelling revenues of CN¥1.5b and earnings per share (EPS) of CN¥0.13 in 2021. Indeed, we can see that the analyst is a lot more bearish about BAIOO Family Interactive's prospects, administering a pretty serious reduction to revenue estimates and slashing their EPS estimates to boot.
The consensus price target fell 59% to HK$0.92, with the weaker earnings outlook clearly leading analyst valuation estimates.
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. We would highlight that sales are expected to reverse, with a forecast 8.8% annualised revenue decline to the end of 2021. That is a notable change from historical growth of 31% 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 20% per year. It's pretty clear that BAIOO Family Interactive's revenues are expected to perform substantially worse than the wider industry.
The Bottom Line
The biggest issue in the new estimates is that the analyst has reduced their earnings per share estimates, suggesting business headwinds lay ahead for BAIOO Family Interactive. Unfortunately the analyst also downgraded their revenue estimates, and industry data suggests that BAIOO Family Interactive's revenues are expected to grow slower than the wider market. Given the scope of the downgrades, it would not be a surprise to see the market become more wary of the business.
With that said, the long-term trajectory of the company's earnings is a lot more important than next year. At least one analyst has provided forecasts out to 2023, which can be seen for free on our platform here.
Another way to search for interesting companies that could be reaching an inflection point is to track whether management are buying or selling, with our free list of growing companies 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.