The latest analyst coverage could presage a bad day for Colony Capital, Inc. (NYSE:CLNY), with the analysts making across-the-board cuts to their statutory estimates that might leave shareholders a little shell-shocked. Both revenue and earnings per share (EPS) estimates were cut sharply as the analysts factored in the latest outlook for the business, concluding that they were too optimistic previously. Surprisingly the share price has been buoyant, rising 13% to US$4.91 in the past 7 days. Whether the downgrade will have a negative impact on demand for shares is yet to be seen.
After the downgrade, the consensus from Colony Capital's three analysts is for revenues of US$1.5b in 2021, which would reflect a painful 35% decline in sales compared to the last year of performance. Losses are predicted to fall substantially, shrinking 81% to US$1.15. Yet before this consensus update, the analysts had been forecasting revenues of US$1.7b and losses of US$0.52 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.
Analysts lifted their price target 20% to US$5.42, implicitly signalling that lower earnings per share are not expected to have a longer-term impact on the stock's value. 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. There are some variant perceptions on Colony Capital, with the most bullish analyst valuing it at US$6.00 and the most bearish at US$4.25 per share. 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 Colony Capital shareholders.
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. These estimates imply that sales are expected to slow, with a forecast revenue decline of 35%, a significant reduction from annual growth of 19% over the last five years. Compare this with our data, which suggests that other companies in the same industry are, in aggregate, expected to see their revenue grow 6.0% next year. It's pretty clear that Colony Capital's revenues are expected to perform substantially worse than the wider industry.
The Bottom Line
The most important thing to take away is that analysts increased their loss per share estimates for next year. Unfortunately analysts also downgraded their revenue estimates, and industry data suggests that Colony Capital's revenues are expected to grow slower than the wider market. The rising price target is a puzzle, but still - with a serious cut to next year's outlook, we wouldn't be surprised if investors were a bit wary of Colony Capital.
Still, the long-term prospects of the business are much more relevant than next year's earnings. At Simply Wall St, we have a full range of analyst estimates for Colony Capital going out to 2023, and you can see them free on our platform here.
Another way to search for interesting companies that could be reaching an inflection point is to track whether management are buying or selling, with our free list of growing companies that insiders are buying.
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This article by Simply Wall St is general in nature. 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.
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