Broker Revenue Forecasts For Bonanza Creek Energy, Inc. (NYSE:BCEI) Are Surging Higher
Bonanza Creek Energy, Inc. (NYSE:BCEI) shareholders will have a reason to smile today, with the analysts making substantial upgrades to this year's forecasts. The analysts have sharply increased their revenue numbers, with a view that Bonanza Creek Energy will make substantially more sales than they'd previously expected. Bonanza Creek Energy has also found favour with investors, with the stock up a noteworthy 15% to US$18.92 over the past week. It will be interesting to see if today's upgrade is enough to propel the stock even higher.
Following the upgrade, the consensus from three analysts covering Bonanza Creek Energy is for revenues of US$238m in 2020, implying a painful 21% decline in sales compared to the last 12 months. Statutory earnings per share are anticipated to crater 49% to US$3.74 in the same period. Previously, the analysts had been modelling revenues of US$195m and earnings per share (EPS) of US$3.66 in 2020. The forecasts seem more optimistic now, with a chunky increase in revenue and a small increase to earnings per share estimates.
See our latest analysis for Bonanza Creek Energy
It will come as no surprise to learn that the analysts have increased their price target for Bonanza Creek Energy 12% to US$24.60 on the back of these upgrades. 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 Bonanza Creek Energy at US$46.00 per share, while the most bearish prices it at US$13.00. So we wouldn't be assigning too much credibility to analyst price targets in this case, because there are clearly some widely differing views on what kind of performance this business can generate. With this in mind, we wouldn't rely too heavily on the consensus price target, as it is just an average and analysts clearly have some deeply divergent views on the 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. One more thing stood out to us about these estimates, and it's the idea that Bonanza Creek Energy'sdecline is expected to accelerate, with revenues forecast to fall 21% next year, topping off a historical decline of 5.6% a year over the past five years. Compare this against analyst estimates for companies in the wider industry, which suggest that revenues (in aggregate) are expected to grow 7.5% next year. So while a broad number of companies are forecast to grow, unfortunately Bonanza Creek Energy is expected to see its sales affected worse than other companies in the industry.
The Bottom Line
The biggest takeaway for us from these new estimates is that analysts upgraded their earnings per share estimates, with improved earnings power expected for this year. Fortunately, they also upgraded their revenue estimates, and are forecasting revenues to grow slower 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 that analysts appear to be expecting substantial improvement in the sales pipeline, now could be the right time to take another look at Bonanza Creek Energy.
Using these estimates as a starting point, we've run a discounted cash flow calculation (DCF) on Bonanza Creek Energy that suggests the company could be somewhat undervalued. For more information, you can click through to our platform to learn more about our valuation approach.
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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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