Analysts Have Made A Financial Statement On Kadokawa Corporation's (TSE:9468) First-Quarter Report

It's been a pretty great week for Kadokawa Corporation (TSE:9468) shareholders, with its shares surging 16% to JP¥2,936 in the week since its latest quarterly results. Results overall were respectable, with statutory earnings of JP¥83.42 per share roughly in line with what the analysts had forecast. Revenues of JP¥66b came in 2.9% ahead of analyst predictions. 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. With this in mind, we've gathered the latest statutory forecasts to see what the analysts are expecting for next year.

View our latest analysis for Kadokawa

Taking into account the latest results, Kadokawa's seven analysts currently expect revenues in 2025 to be JP¥266.3b, approximately in line with the last 12 months. Per-share earnings are expected to swell 17% to JP¥95.83. Before this earnings report, the analysts had been forecasting revenues of JP¥266.2b and earnings per share (EPS) of JP¥102 in 2025. The analysts seem to have become a little more negative on the business after the latest results, given the minor downgrade to their earnings per share numbers for next year.

It might be a surprise to learn that the consensus price target was broadly unchanged at JP¥3,704, with the analysts clearly implying that the forecast decline in earnings is not expected to have much of an impact on valuation. There's another way to think about price targets though, and that's to look at the range of price targets put forward by analysts, because a wide range of estimates could suggest a diverse view on possible outcomes for the business. Currently, the most bullish analyst values Kadokawa at JP¥4,300 per share, while the most bearish prices it at JP¥2,800. Analysts definitely have varying views on the business, but the spread of estimates is not wide enough in our view to suggest that extreme outcomes could await Kadokawa shareholders.

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 would highlight that Kadokawa's revenue growth is expected to slow, with the forecast 0.6% annualised growth rate until the end of 2025 being well below the historical 6.0% p.a. growth over the last five years. Compare this against other companies (with analyst forecasts) in the industry, which are in aggregate expected to see revenue growth of 4.0% annually. So it's pretty clear that, while revenue growth is expected to slow down, the wider industry is also expected to grow faster than Kadokawa.

The Bottom Line

The biggest concern is that the analysts reduced their earnings per share estimates, suggesting business headwinds could lay ahead for Kadokawa. On the plus side, there were no major changes to revenue estimates; although forecasts imply they will perform worse than the wider industry. The consensus price target held steady at JP¥3,704, with the latest estimates not enough to have an impact on their price targets.

Keeping that in mind, we still think that the longer term trajectory of the business is much more important for investors to consider. We have forecasts for Kadokawa going out to 2027, and you can see them free on our platform here.

However, before you get too enthused, we've discovered 1 warning sign for Kadokawa that you should be aware of.

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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.