Newsflash: Playa Hotels & Resorts N.V. (NASDAQ:PLYA) Analysts Have Been Trimming Their Revenue Forecasts

One thing we could say about the analysts on Playa Hotels & Resorts N.V. (NASDAQ:PLYA) - they aren't optimistic, having just made a major negative revision to their near-term (statutory) forecasts for the organization. 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 four analysts covering Playa Hotels & Resorts are now predicting revenues of US$350m in 2021. If met, this would reflect a substantial 29% improvement in sales compared to the last 12 months. Losses are predicted to fall substantially, shrinking 48% to US$1.03. Yet before this consensus update, the analysts had been forecasting revenues of US$397m and losses of US$0.96 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.

See our latest analysis for Playa Hotels & Resorts

The consensus price target lifted 12% to US$7.45, clearly signalling that the weaker revenue and EPS outlook are not expected to weigh on the stock over the longer term. The consensus price target is just an average of individual analyst targets, so - it could be handy to see how wide the range of underlying estimates is. Currently, the most bullish analyst values Playa Hotels & Resorts at US$10.00 per share, while the most bearish prices it at US$5.00. Note the wide gap in analyst price targets? This implies to us that there is a fairly broad range of possible scenarios for the underlying business.

Taking a look at the bigger picture now, one of the ways we can understand these forecasts is to see how they compare to both past performance and industry growth estimates. The analysts are definitely expecting Playa Hotels & Resorts' growth to accelerate, with the forecast 29% annualised growth to the end of 2021 ranking favourably alongside historical growth of 0.1% per annum over the past five years. Compare this with other companies in the same industry, which are forecast to grow their revenue 23% annually. Factoring in the forecast acceleration in revenue, it's pretty clear that Playa Hotels & Resorts is expected to grow much faster than its industry.

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 Playa Hotels & Resorts. While analysts did downgrade their revenue estimates, these forecasts still imply revenues will perform better than the wider market. There was also an increase in the price target, suggesting that there is more optimism baked into the forecasts than there was previously. Given the stark change in sentiment, we'd understand if investors became more cautious on Playa Hotels & Resorts after today.

Still, the long-term prospects of the business are much more relevant than next year's earnings. We have estimates - from multiple Playa Hotels & Resorts analysts - going out to 2023, and you can see them free on our platform here.

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