The analyst covering RigNet, Inc. (NASDAQ:RNET) delivered a dose of negativity to shareholders today, by making a substantial revision to their statutory forecasts for this year. Revenue and earnings per share (EPS) forecasts were both revised downwards, with the analyst seeing grey clouds on the horizon.
Following the downgrade, the consensus from solitary analyst covering RigNet is for revenues of US$206m in 2020, implying a not inconsiderable 15% decline in sales compared to the last 12 months. Per-share losses are expected to explode, reaching US$1.98 per share. Yet prior to the latest estimates, the analyst had been forecasting revenues of US$234m and losses of US$1.34 per share in 2020. So there’s been quite a change-up of views after the recent consensus updates, with the analyst making a serious cut to their revenue forecasts while also expecting losses per share to increase.
Of course, another way to look at these forecasts is to place them into context against the industry itself. By contrast, our data suggests that other companies (with analyst coverage) in the industry are forecast to see their revenue shrink 3.0% per year. So it’s pretty clear that RigNet sales are expected to decline at a faster rate than the wider 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 RigNet. Unfortunately they also cut their revenue estimates for this year, and they expect sales to lag the wider market. That said, earnings per share are more important for creating value for shareholders. We wouldn’t be surprised to find shareholders feeling a bit shell-shocked, after these downgrades. It looks like the analyst has become a lot more bearish on RigNet, and their negativity could be grounds for caution.
That said, this broker might have good reason to be negative on RigNet, given a short cash runway. For more information, you can click here to discover this and the 4 other concerns we’ve identified.
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