The latest analyst coverage could presage a bad day for On the Beach Group plc (LON:OTB), with the analysts making across-the-board cuts to their statutory estimates that might leave shareholders a little shell-shocked. There was a fairly draconian cut to their revenue estimates, perhaps an implicit admission that previous forecasts were much too optimistic. Surprisingly the share price has been buoyant, rising 47% to UK£2.21 in the past 7 days. Whether the downgrade will have a negative impact on demand for shares is yet to be seen.
Following the downgrade, the consensus from seven analysts covering On the Beach Group is for revenues of UK£122m in 2020, implying a considerable 13% decline in sales compared to the last 12 months. Before the latest update, the analysts were foreseeing UK£142m of revenue in 2020. It looks like forecasts have become a fair bit less optimistic on On the Beach Group, given the substantial drop in revenue estimates.
The consensus price target fell 7.2% to UK£3.71, with the analysts clearly less optimistic about On the Beach Group's valuation following this update. 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. The most optimistic On the Beach Group analyst has a price target of UK£4.90 per share, while the most pessimistic values it at UK£2.80. This shows there is still some diversity in estimates, but analysts don't appear to be totally split on the stock as though it might be a success or failure situation.
Another way we can view these estimates is in the context of the bigger picture, such as how the forecasts stack up against past performance, and whether forecasts are more or less bullish relative to other companies in the industry. These estimates imply that sales are expected to slow, with a forecast revenue decline of 13%, a significant reduction from annual growth of 20% over the last five years. By contrast, our data suggests that other companies (with analyst coverage) in the same industry are forecast to see their revenue grow 13% annually for the foreseeable future. It's pretty clear that On the Beach Group'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 cut their revenue estimates for this year. They're also anticipating slower revenue growth than the wider market. Given the scope of the downgrades, it would not be a surprise to see the market become more wary of the business.
Unanswered questions? We have estimates for On the Beach Group from its seven analysts out until 2023, 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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