News Flash: One SpiceJet Limited (NSE:SPICEJET) Analyst Has Been Trimming Their Revenue Forecasts

Market forces rained on the parade of SpiceJet Limited (NSE:SPICEJET) shareholders today, when the covering analyst downgraded their forecasts for this year. There was a fairly draconian cut to their revenue estimates, perhaps an implicit admission that previous forecasts were much too optimistic. Shares are up 5.1% to ₹53.10 in the past week. We'd be curious to see if the downgrade is enough to reverse investor sentiment on the business.

Following the latest downgrade, the current consensus, from the one analyst covering SpiceJet, is for revenues of ₹47b in 2021, which would reflect a substantial 62% reduction in SpiceJet's sales over the past 12 months. Losses are supposed to balloon 51% to ₹45.37 per share. However, before this estimates update, the consensus had been expecting revenues of ₹52b and ₹43.37 per share in losses. So there's been quite a change-up of views after the recent consensus updates, with the analyst making a serious cut to their revenue forecasts while also expecting losses per share to increase.

Check out our latest analysis for SpiceJet

The consensus price target fell 8.0% to ₹53.19, with the analyst clearly concerned about the company following the weaker revenue and earnings outlook. 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. There are some variant perceptions on SpiceJet, with the most bullish analyst valuing it at ₹85.00 and the most bearish at ₹26.50 per share. With such a wide range in price targets, the analyst is almost certainly betting on widely diverse outcomes for the underlying business. With this in mind, we wouldn't rely too heavily on the consensus price target, as it is just an average and analysts clearly have some deeply divergent views on 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. These estimates imply that sales are expected to slow, with a forecast revenue decline of 62%, a significant reduction from annual growth of 21% over the last five years. By contrast, our data suggests that other companies (with analyst coverage) in the same industry are forecast to see their revenue grow 22% annually for the foreseeable future. So although its revenues are forecast to shrink, this cloud does not come with a silver lining - SpiceJet is expected to lag the wider industry.

The Bottom Line

The most important thing to note from this downgrade is that the consensus increased its forecast losses this year, suggesting all may not be well at SpiceJet. Unfortunately the analyst also downgraded their revenue estimates, and industry data suggests that SpiceJet's revenues are expected to grow slower than the wider market. The consensus price target fell measurably, with the analyst seemingly not reassured by recent business developments, leading to a lower estimate of SpiceJet's future valuation. Overall, given the drastic downgrade to this year's forecasts, we'd be feeling a little more wary of SpiceJet going forwards.

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.

Of course, seeing company management invest large sums of money in a stock can be just as useful as knowing whether analysts are downgrading their estimates. So you may also wish to search this free list of stocks that insiders are buying.

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