Redbox Entertainment Inc. (NASDAQ:RDBX) Analysts Just Slashed Next Year's Estimates

Market forces rained on the parade of Redbox Entertainment Inc. (NASDAQ:RDBX) shareholders today, when the analysts downgraded their forecasts for next year. Both revenue and earnings per share (EPS) forecasts went under the knife, suggesting the analysts have soured majorly on the business.

After this downgrade, Redbox Entertainment's four analysts are now forecasting revenues of US$639m in 2022. This would be a sizeable 115% improvement in sales compared to the last 12 months. Losses are predicted to fall substantially, shrinking 95% to US$0.13. Previously, the analysts had been modelling revenues of US$828m and earnings per share (EPS) of US$0.46 in 2022. So we can see that the consensus has become notably more bearish on Redbox Entertainment's outlook with these numbers, making a pretty serious reduction to next year's revenue estimates. Furthermore, they expect the business to be loss-making next year, compared to their previous forecasts of a profit.

Check out our latest analysis for Redbox Entertainment

The consensus price target fell 27% to US$15.25, with the analysts clearly concerned about the company following the weaker revenue and earnings outlook. It could also be instructive to look at the range of analyst estimates, to evaluate how different the outlier opinions are from the mean. There are some variant perceptions on Redbox Entertainment, with the most bullish analyst valuing it at US$35.00 and the most bearish at US$5.00 per share. We would probably assign less value to the forecasts in this situation, because such a wide range of estimates could imply that the future of this business is difficult to value accurately. 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.

Of course, another way to look at these forecasts is to place them into context against the industry itself. For example, we noticed that Redbox Entertainment's rate of growth is expected to accelerate meaningfully, with revenues forecast to exhibit 84% growth to the end of 2022 on an annualised basis. That is well above its historical decline of 51% a year over the past three years. Compare this against analyst estimates for the broader industry, which suggest that (in aggregate) industry revenues are expected to grow 13% annually. Not only are Redbox Entertainment's revenues expected to improve, it seems that the analysts are also expecting it to grow faster than the wider industry.

The Bottom Line

The most important thing to take away is that analysts are expecting Redbox Entertainment to become unprofitable next year. While analysts did downgrade their revenue estimates, these forecasts still imply revenues will perform better than the wider market. After such a stark change in sentiment from analysts, we'd understand if readers now felt a bit wary of Redbox Entertainment.

With that said, the long-term trajectory of the company's earnings is a lot more important than next year. At Simply Wall St, we have a full range of analyst estimates for Redbox Entertainment going out to 2024, and you can see them 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.

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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.