News Flash: One REDtone Digital Berhad (KLSE:REDTONE) Analyst Has Been Trimming Their Revenue Forecasts

The analyst covering REDtone Digital Berhad (KLSE:REDTONE) delivered a dose of negativity to shareholders today, by making a substantial revision to their statutory forecasts for this year. Revenue estimates were cut sharply as the analyst signalled a weaker outlook - perhaps a sign that investors should temper their expectations as well.

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After the downgrade, the one analyst covering REDtone Digital Berhad is now predicting revenues of RM352m in 2025. If met, this would reflect an okay 4.0% improvement in sales compared to the last 12 months. Statutory earnings per share are supposed to dive 36% to RM0.054 in the same period. Before this latest update, the analyst had been forecasting revenues of RM401m and earnings per share (EPS) of RM0.059 in 2025. Indeed, we can see that analyst sentiment has declined measurably after the new consensus came out, with a measurable cut to revenue estimates and a minor downgrade to EPS estimates to boot.

View our latest analysis for REDtone Digital Berhad

The average price target climbed 58% to RM0.95 despite the reduced earnings forecasts, suggesting that this earnings impact could be a positive for the stock, once it passes.

These estimates are interesting, but it can be useful to paint some more broad strokes when seeing how forecasts compare, both to the REDtone Digital Berhad's past performance and to peers in the same industry. We would highlight that REDtone Digital Berhad's revenue growth is expected to slow, with the forecast 4.0% annualised growth rate until the end of 2025 being well below the historical 21% p.a. growth over the last five years. Compare this to the 7 other companies in this industry with analyst coverage, which are forecast to grow their revenue at 4.3% per year. Factoring in the forecast slowdown in growth, it looks like REDtone Digital Berhad is forecast to grow at about the same rate as the wider industry.

The Bottom Line

The biggest issue in the new estimates is that the analyst has reduced their earnings per share estimates, suggesting business headwinds lay ahead for REDtone Digital Berhad. Lamentably, they also downgraded their sales forecasts, but the business is still expected to grow at roughly the same rate as the market itself. There was also an increase in the price target, suggesting that there is more optimism baked into the forecasts than there was previously. Overall, given the drastic downgrade to this year's forecasts, we'd be feeling a little more wary of REDtone Digital Berhad going forwards.

As you can see, this broker clearly isn't bullish, and there might be good reason for that. We've identified some potential issues with REDtone Digital Berhad's financials, such as concerns around earnings quality. For more information, you can click here to discover this and the 1 other concern we've identified.

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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.