Here's What Analysts Are Forecasting For Cloud Music Inc. (HKG:9899) After Its Second-Quarter Results

Cloud Music Inc. (HKG:9899) last week reported its latest second-quarter results, which makes it a good time for investors to dive in and see if the business is performing in line with expectations. This is an important time for investors, as they can track a company's performance in its report, look at what experts are forecasting for next year, and see if there has been any change to expectations for the business. We thought readers would find it interesting to see the analysts latest (statutory) post-earnings forecasts for next year.

See our latest analysis for Cloud Music

Taking into account the latest results, the current consensus from Cloud Music's five analysts is for revenues of CN¥9.09b in 2022, which would reflect a decent 13% increase on its sales over the past 12 months. Earnings are expected to tip over into lossmaking territory, with the analysts forecasting statutory losses of -CN¥3.75 per share in 2022. Yet prior to the latest earnings, the analysts had been forecasting revenues of CN¥9.28b and losses of CN¥5.20 per share in 2022. Although the revenue estimates have fallen somewhat, Cloud Music'sfuture looks a little different to the past, with a considerable decrease in the loss per share forecasts in particular.

The consensus price target was broadly unchanged at HK$149, implying that the business is performing roughly in line with expectations, despite adjustments to both revenue and earnings estimates. The consensus price target is just an average of individual analyst targets, so - it could be handy to see how wide the range of underlying estimates is. The most optimistic Cloud Music analyst has a price target of HK$218 per share, while the most pessimistic values it at HK$102. Note the wide gap in analyst price targets? This implies to us that there is a fairly broad range of possible scenarios for the underlying business.

Looking at the bigger picture now, one of the ways we can make sense of these forecasts is to see how they measure up against both past performance and industry growth estimates. The period to the end of 2022 brings more of the same, according to the analysts, with revenue forecast to display 27% growth on an annualised basis. That is in line with its 32% annual growth over the past year. Compare this with the broader industry, which analyst estimates (in aggregate) suggest will see revenues grow 20% annually. So it's pretty clear that Cloud Music is forecast to grow substantially faster than its industry.

The Bottom Line

The most important thing to take away is that the analysts reconfirmed their loss per share estimates for next year. Regrettably, they also downgraded their revenue estimates, but the latest forecasts still imply the business will grow faster than the wider industry. Yet - earnings are more important to the intrinsic value of the business. There was no real change to the consensus price target, suggesting that the intrinsic value of the business has not undergone any major changes with the latest estimates.

With that in mind, we wouldn't be too quick to come to a conclusion on Cloud Music. Long-term earnings power is much more important than next year's profits. At Simply Wall St, we have a full range of analyst estimates for Cloud Music going out to 2024, and you can see them free on our platform here..

That said, it's still necessary to consider the ever-present spectre of investment risk. We've identified 2 warning signs with Cloud Music (at least 1 which makes us a bit uncomfortable) , and understanding these should be part of your investment process.

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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.