FriendTimes Inc. Just Missed Earnings And Its Revenue Numbers Were Weaker Than Expected

FriendTimes Inc. (HKG:6820) shareholders are probably feeling a little disappointed, since its shares fell 6.3% to HK$2.70 in the week after its latest yearly results. Revenues came in 5.1% below expectations, at CN¥2.2b. Statutory earnings per share were relatively better off, with a per-share profit of CN¥0.23 being roughly in line with analyst estimates. Following the result, the analysts have updated their earnings model, and it would be good to know whether they think there's been a strong change in the company's prospects, or if it's business as usual. We've gathered the most recent statutory forecasts to see whether the analysts have changed their earnings models, following these results.

Check out our latest analysis for FriendTimes

Taking into account the latest results, the current consensus from FriendTimes' six analysts is for revenues of CN¥2.85b in 2021, which would reflect a major 31% increase on its sales over the past 12 months. Per-share earnings are expected to shoot up 24% to CN¥0.29. Before this earnings report, the analysts had been forecasting revenues of CN¥2.92b and earnings per share (EPS) of CN¥0.29 in 2021. It's pretty clear that pessimism has reared its head after the latest results, leading to a weaker revenue outlook and a minor downgrade to earnings per share estimates.

Despite the cuts to forecast earnings, there was no real change to the HK$3.67 price target, showing that the analysts don't think the changes have a meaningful impact on its intrinsic value. That's not the only conclusion we can draw from this data however, as some investors also like to consider the spread in estimates when evaluating analyst price targets. There are some variant perceptions on FriendTimes, with the most bullish analyst valuing it at HK$4.30 and the most bearish at HK$3.20 per share. Still, with such a tight range of estimates, it suggeststhe analysts have a pretty good idea of what they think the company is worth.

Another way we can view these estimates is in the context of the bigger picture, such as how the forecasts stack up against past performance, and whether forecasts are more or less bullish relative to other companies in the industry. We can infer from the latest estimates that forecasts expect a continuation of FriendTimes'historical trends, as the 31% annualised revenue growth to the end of 2021 is roughly in line with the 27% annual revenue growth over the past three years. Compare this with the broader industry, which analyst estimates (in aggregate) suggest will see revenues grow 26% annually. So although FriendTimes is expected to maintain its revenue growth rate, it's only growing at about the rate of the wider industry.

The Bottom Line

The biggest concern is that the analysts reduced their earnings per share estimates, suggesting business headwinds could lay ahead for FriendTimes. They also downgraded their revenue estimates, although as we saw earlier, forecast growth is only expected to be about the same as the wider industry. The consensus price target held steady at CN¥3.67, with the latest estimates not enough to have an impact on their price targets.

With that in mind, we wouldn't be too quick to come to a conclusion on FriendTimes. Long-term earnings power is much more important than next year's profits. We have forecasts for FriendTimes going out to 2023, and you can see them free on our platform here.

And what about risks? Every company has them, and we've spotted 2 warning signs for FriendTimes you should know about.

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