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Downgrade: Here's How Analysts See Chicken Soup for the Soul Entertainment, Inc. (NASDAQ:CSSE) Performing In The Near Term

One thing we could say about the analysts on Chicken Soup for the Soul Entertainment, Inc. (NASDAQ:CSSE) - they aren't optimistic, having just made a major negative revision to their near-term (statutory) forecasts for the organization. Both revenue and earnings per share (EPS) forecasts went under the knife, suggesting analysts have soured majorly on the business. Shares are up 9.7% to US$6.57 in the past week. Investors could be forgiven for changing their mind on the business following the downgrade; but it's not clear if the revised forecasts will lead to selling activity.

After this downgrade, Chicken Soup for the Soul Entertainment's five analysts are now forecasting revenues of US$79m in 2020. This would be a substantial 85% improvement in sales compared to the last 12 months. Losses are supposed to balloon 39% to US$2.53 per share. Yet before this consensus update, the analysts had been forecasting revenues of US$98m and losses of US$0.83 per share in 2020. Ergo, there's been a clear change in sentiment, with the analysts administering a notable cut to this year's revenue estimates, while at the same time increasing their loss per share forecasts.

Check out our latest analysis for Chicken Soup for the Soul Entertainment

NasdaqGM:CSSE Past and Future Earnings April 1st 2020
NasdaqGM:CSSE Past and Future Earnings April 1st 2020

The consensus price target fell 6.9% to US$20.25, with the analysts clearly concerned about the company following the weaker revenue and earnings outlook. 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 Chicken Soup for the Soul Entertainment, with the most bullish analyst valuing it at US$27.00 and the most bearish at US$13.00 per share. This is a fairly broad spread of estimates, suggesting that the analysts are forecasting a wide range of possible outcomes for the business.

Of course, another way to look at these forecasts is to place them into context against the industry itself. The analysts are definitely expecting Chicken Soup for the Soul Entertainment'sgrowth to accelerate, with the forecast 85% growth ranking favourably alongside historical growth of 63% per annum over the past three years. Compare this with other companies in the same industry, which are forecast to grow their revenue 11% next year. It seems obvious that, while the growth outlook is brighter than the recent past, the analysts also expect Chicken Soup for the Soul Entertainment to grow faster 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 Chicken Soup for the Soul Entertainment. Unfortunately, analysts also downgraded their revenue estimates, although our data indicates revenues are expected to 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 Chicken Soup for the Soul Entertainment.

With that said, the long-term trajectory of the company's earnings is a lot more important than next year. We have estimates - from multiple Chicken Soup for the Soul Entertainment analysts - going out to 2024, 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.

If you spot an error that warrants correction, please contact the editor at editorial-team@simplywallst.com. 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. Simply Wall St has no position in the stocks mentioned.

We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Thank you for reading.