FriendTimes Inc. (HKG:6820) Analysts Are More Bearish Than They Used To Be

Market forces rained on the parade of FriendTimes Inc. (HKG:6820) shareholders today, when the analysts downgraded their forecasts for this year. Both revenue and earnings per share (EPS) estimates were cut sharply as analysts factored in the latest outlook for the business, concluding that they were too optimistic previously.

Following the downgrade, the latest consensus from FriendTimes' four analysts is for revenues of CN¥2.0b in 2022, which would reflect a sizeable 25% improvement in sales compared to the last 12 months. Per-share earnings are expected to swell 16% to CN¥0.15. Previously, the analysts had been modelling revenues of CN¥2.3b and earnings per share (EPS) of CN¥0.24 in 2022. It looks like analyst sentiment has declined substantially, with a measurable cut to revenue estimates and a large cut to earnings per share numbers as well.

View our latest analysis for FriendTimes

The consensus price target fell 9.0% to HK$2.43, with the weaker earnings outlook clearly leading analyst valuation estimates. 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 FriendTimes analyst has a price target of HK$3.60 per share, while the most pessimistic values it at HK$1.50. This is a fairly broad spread of estimates, suggesting that the analysts are forecasting a wide range of possible outcomes for 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. It's clear from the latest estimates that FriendTimes' rate of growth is expected to accelerate meaningfully, with the forecast 25% annualised revenue growth to the end of 2022 noticeably faster than its historical growth of 17% p.a. over the past five years. Compare this with other companies in the same industry, which are forecast to grow their revenue 18% annually. Factoring in the forecast acceleration in revenue, it's pretty clear that FriendTimes is expected to grow much faster than its 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. Unfortunately, analysts also downgraded their revenue estimates, although our data indicates revenues are expected to perform better than the wider market. After such a stark change in sentiment from analysts, we'd understand if readers now felt a bit wary of FriendTimes.

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 FriendTimes going out to 2024, and you can see them 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.