AirAsia Group Berhad (KLSE:AIRASIA) Analysts Are More Bearish Than They Used To Be

The analysts covering AirAsia Group Berhad (KLSE:AIRASIA) delivered a dose of negativity to shareholders today, by making a substantial revision to their statutory forecasts for this year. Both revenue and earnings per share (EPS) forecasts went under the knife, suggesting the analysts have soured majorly on the business.

After the downgrade, the 17 analysts covering AirAsia Group Berhad are now predicting revenues of RM3.6b in 2021. If met, this would reflect a substantial 191% improvement in sales compared to the last 12 months. Losses are predicted to fall substantially, shrinking 68% to RM0.48. Yet before this consensus update, the analysts had been forecasting revenues of RM5.7b and losses of RM0.34 per share in 2021. So there's been quite a change-up of views after the recent consensus updates, with the analysts making a serious cut to their revenue forecasts while also expecting losses per share to increase.

View our latest analysis for AirAsia Group Berhad

There was no major change to the consensus price target of RM0.66, signalling that the business is performing roughly in line with expectations, despite lower earnings per share forecasts. 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 AirAsia Group Berhad, with the most bullish analyst valuing it at RM1.52 and the most bearish at RM0.20 per share. As you can see the range of estimates is wide, with the lowest valuation coming in at less than half the most bullish estimate, suggesting there are some strongly diverging views on how think this business will perform. As a result it might not be possible to derive much meaning from the consensus price target, which is after all just an average of this wide range of estimates.

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. One thing stands out from these estimates, which is that AirAsia Group Berhad is forecast to grow faster in the future than it has in the past, with revenues expected to display 3x annualised growth until the end of 2021. If achieved, this would be a much better result than the 1.6% annual decline over the past five years. Compare this against analyst estimates for the broader industry, which suggest that (in aggregate) industry revenues are expected to grow 24% annually. So it looks like AirAsia Group Berhad is expected to grow faster than its competitors, at least for a while.

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 AirAsia Group Berhad. Unfortunately, analysts also downgraded their revenue estimates, although our data indicates revenues are expected to perform better than the wider market. The lack of change in the price target is puzzling in light of the downgrade but, with a serious decline expected this year, we wouldn't be surprised if investors were a bit wary of AirAsia Group Berhad.

That said, the analysts might have good reason to be negative on AirAsia Group Berhad, given dilutive stock issuance over the past year. For more information, you can click here to discover this and the 2 other flags we've identified.

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This article by Simply Wall St is general in nature. 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.
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