Stock Analysis

SkyCity Entertainment Group Limited (NZSE:SKC) Analysts Just Trimmed Their Revenue Forecasts By 15%

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Market forces rained on the parade of SkyCity Entertainment Group Limited (NZSE:SKC) shareholders today, when the analysts downgraded their forecasts for this year. This report focused on revenue estimates, and it looks as though the consensus view of the business has become substantially more conservative.

Following the downgrade, the consensus from ten analysts covering SkyCity Entertainment Group is for revenues of NZ$596m in 2022, implying a perceptible 3.2% decline in sales compared to the last 12 months. Before the latest update, the analysts were foreseeing NZ$705m of revenue in 2022. It looks like forecasts have become a fair bit less optimistic on SkyCity Entertainment Group, given the measurable cut to revenue estimates.

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NZSE:SKC Earnings and Revenue Growth February 22nd 2022

We'd point out that there was no major changes to their price target of NZ$3.53, suggesting the latest estimates were not enough to shift their view on the value of the business. 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. The most optimistic SkyCity Entertainment Group analyst has a price target of NZ$3.95 per share, while the most pessimistic values it at NZ$3.14. The narrow spread of estimates could suggest that the business' future is relatively easy to value, or that the analysts have a clear view on its prospects.

Looking at the bigger picture now, one of the ways we can make sense of these forecasts is to see how they measure up against both past performance and industry growth estimates. We would also point out that the forecast 6.4% annualised revenue decline to the end of 2022 is better than the historical trend, which saw revenues shrink 9.1% annually 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 13% annually. So it's pretty clear that, while it does have declining revenues, the analysts also expect SkyCity Entertainment Group to suffer worse than the wider industry.

The Bottom Line

The clear low-light was that analysts slashing their revenue forecasts for SkyCity Entertainment Group this year. They also expect company revenue to perform worse than the wider market. Often, one downgrade can set off a daisy-chain of cuts, especially if an industry is in decline. So we wouldn't be surprised if the market became a lot more cautious on SkyCity Entertainment Group after today.

Unsatisfied? At least one of SkyCity Entertainment Group's ten analysts has provided estimates out to 2024, 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.

Valuation is complex, but we're helping make it simple.

Find out whether SkyCity Entertainment Group is potentially over or undervalued by checking out our comprehensive analysis, which includes fair value estimates, risks and warnings, dividends, insider transactions and financial health.

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SkyCity Entertainment Group

SkyCity Entertainment Group Limited, together with its subsidiaries, operates in the gaming, entertainment, hotel, convention, hospitality, and tourism sectors in New Zealand and Australia.

Adequate balance sheet with moderate growth potential.