Analysts Just Slashed Their FriendTimes Inc. (HKG:6820) EPS Numbers

Today is shaping up negative for FriendTimes Inc. (HKG:6820) shareholders, with the analysts delivering a substantial negative revision to this year's forecasts. Both revenue and earnings per share (EPS) estimates were cut sharply as the analysts factored in the latest outlook for the business, concluding that they were too optimistic previously.

After this downgrade, FriendTimes' three analysts are now forecasting revenues of CN¥1.5b in 2023. This would be a solid 17% improvement in sales compared to the last 12 months. Statutory earnings per share are presumed to bounce 717% to CN¥0.064. Before this latest update, the analysts had been forecasting revenues of CN¥1.7b and earnings per share (EPS) of CN¥0.074 in 2023. It looks like analyst sentiment has declined substantially, with a measurable cut to revenue estimates and a real cut to earnings per share numbers as well.

See our latest analysis for FriendTimes

Analysts made no major changes to their price target of HK$1.42, suggesting the downgrades are not expected to have a long-term impact on FriendTimes' valuation.

Taking a look at the bigger picture now, one of the ways we can understand these forecasts is to see how they compare to both past performance and industry growth estimates. For example, we noticed that FriendTimes' rate of growth is expected to accelerate meaningfully, with revenues forecast to exhibit 17% growth to the end of 2023 on an annualised basis. That is well above its historical decline of 15% a year over the past three years. Compare this against analyst estimates for the broader industry, which suggest that (in aggregate) industry revenues are expected to grow 20% annually. So it looks like FriendTimes is expected to grow at about the same rate as the wider industry.

The Bottom Line

The biggest issue in the new estimates is that analysts have reduced their earnings per share estimates, suggesting business headwinds lay ahead for FriendTimes. Lamentably, they also downgraded their sales forecasts, but the business is still expected to grow at roughly the same rate as the market itself. 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 FriendTimes after the downgrade.

After a downgrade like this, it's pretty clear that previous forecasts were too optimistic. What's more, we've spotted several possible issues with FriendTimes' business, like its declining profit margins. For more information, you can click here to discover this and the 1 other risk we've identified.

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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.