Telenor ASA (OB:TEL) Analysts Just Trimmed Their Revenue Forecasts By 15%

Market forces rained on the parade of Telenor ASA (OB:TEL) shareholders today, when the analysts 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.

After the downgrade, the consensus from Telenor's 15 analysts is for revenues of kr80b in 2023, which would reflect a considerable 20% decline in sales compared to the last year of performance. Per-share earnings are expected to shoot up 225% to kr10.26. Previously, the analysts had been modelling revenues of kr94b and earnings per share (EPS) of kr11.00 in 2023. 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 Telenor

Despite the cuts to forecast earnings, there was no real change to the kr130 price target, showing that the analysts don't think the changes have a meaningful impact on its intrinsic value. 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. Currently, the most bullish analyst values Telenor at kr160 per share, while the most bearish prices it at kr86.00. 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 Telenor shareholders.

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. One more thing stood out to us about these estimates, and it's the idea that Telenor's decline is expected to accelerate, with revenues forecast to fall at an annualised rate of 26% to the end of 2023. This tops off a historical decline of 3.1% a year over the past five years. Compare this against analyst estimates for companies in the broader industry, which suggest that revenues (in aggregate) are expected to grow 2.1% annually. So it's pretty clear that, while it does have declining revenues, the analysts also expect Telenor to suffer worse than the wider industry.

The Bottom Line

The most important thing to take away is that analysts cut their earnings per share estimates, expecting a clear decline in business conditions. Unfortunately analysts also downgraded their revenue estimates, and industry data suggests that Telenor's revenues are expected to grow slower than the wider market. Given the stark change in sentiment, we'd understand if investors became more cautious on Telenor after today.

After a downgrade like this, it's pretty clear that previous forecasts were too optimistic. What's more, we've spotted several possible issues with Telenor's business, like a weak balance sheet. For more information, you can click here to discover this and the 4 other flags we've identified.

You can also see our analysis of Telenor's Board and CEO remuneration and experience, and whether company insiders have been buying stock.

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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.