Analyst Forecasts Just Became More Bearish On Gulf Keystone Petroleum Limited (LON:GKP)
The latest analyst coverage could presage a bad day for Gulf Keystone Petroleum Limited (LON:GKP), with the analysts making across-the-board cuts to their statutory estimates that might leave shareholders a little shell-shocked. This report focused on revenue estimates, and it looks as though the consensus view of the business has become substantially more conservative.
Following the downgrade, the consensus from five analysts covering Gulf Keystone Petroleum is for revenues of US$167m in 2023, implying a sizeable 40% decline in sales compared to the last 12 months. Before the latest update, the analysts were foreseeing US$199m of revenue in 2023. The consensus view seems to have become more pessimistic on Gulf Keystone Petroleum, noting the substantial drop in revenue estimates in this update.
See our latest analysis for Gulf Keystone Petroleum
The consensus price target fell 10% to US$2.36, with the analysts clearly less optimistic about Gulf Keystone Petroleum's valuation following this update. Fixating on a single price target can be unwise though, since the consensus target is effectively the average of analyst price targets. As a result, some investors like to look at the range of estimates to see if there are any diverging opinions on the company's valuation. There are some variant perceptions on Gulf Keystone Petroleum, with the most bullish analyst valuing it at US$3.35 and the most bearish at US$1.25 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. These estimates imply that sales are expected to slow, with a forecast annualised revenue decline of 40% by the end of 2023. This indicates a significant reduction from annual growth of 15% over the last five years. Yet aggregate analyst estimates for other companies in the industry suggest that industry revenues are forecast to decline 1.7% per year. So it's pretty clear that Gulf Keystone Petroleum's revenues are expected to shrink faster than the wider industry.
The Bottom Line
The most important thing to take away is that analysts cut their revenue estimates for this year. Analysts also expect revenues to shrink faster than the wider market. The consensus price target fell measurably, with analysts seemingly not reassured by recent business developments, leading to a lower estimate of Gulf Keystone Petroleum's future valuation. Often, one downgrade can set off a daisy-chain of cuts, especially if an industry is in decline. So we wouldn't be surprised if the market became a lot more cautious on Gulf Keystone Petroleum after today.
Still got questions? We have estimates for Gulf Keystone Petroleum from its five analysts out until 2025, and you can see them free on our platform here.
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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.
