Analyst Forecasts Just Got A Whole Lot More Bearish On SilverBow Resources, Inc. (NYSE:SBOW)
The latest analyst coverage could presage a bad day for SilverBow Resources, Inc. (NYSE:SBOW), with the analysts making across-the-board cuts to their statutory estimates that might leave shareholders a little shell-shocked. Revenue estimates were cut sharply as analysts signalled a weaker outlook - perhaps a sign that investors should temper their expectations as well. The stock price has risen 8.6% to US$4.55 over 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.
Following the latest downgrade, the two analysts covering SilverBow Resources provided consensus estimates of US$177m revenue in 2020, which would reflect a substantial 34% decline on its sales over the past 12 months. Before the latest update, the analysts were foreseeing US$219m of revenue in 2020. It looks like forecasts have become a fair bit less optimistic on SilverBow Resources, given the substantial drop in revenue estimates.
View our latest analysis for SilverBow Resources
Additionally, the consensus price target for SilverBow Resources increased 41% to US$6.00, showing a clear increase in optimism from the analysts involved. There's another way to think about price targets though, and that's to look at the range of price targets put forward by analysts, because a wide range of estimates could suggest a diverse view on possible outcomes for the business. The most optimistic SilverBow Resources analyst has a price target of US$7.00 per share, while the most pessimistic values it at US$5.00. There are definitely some different views on the stock, but the range of estimates is not wide enough as to imply that the situation is unforecastable, in our view.
Looking at the bigger picture now, one of the ways we can make sense of these forecasts is to see how they measure up against both past performance and industry growth estimates. Over the past five years, revenues have declined around 2.4% annually. Worse, forecasts are essentially predicting the decline to accelerate, with the estimate for a 34% decline in revenue next year. By contrast, our data suggests that other companies (with analyst coverage) in a similar industry are forecast to see their revenue grow 9.1% per year. So while a broad number of companies are forecast to decline, unfortunately SilverBow Resources is expected to see its sales affected worse than other companies in the industry.
The Bottom Line
The most important thing to take away is that analysts cut their revenue estimates for this year. They also expect company revenue to perform worse 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 the stark change in sentiment, we'd understand if investors became more cautious on SilverBow Resources after today.
After a downgrade like this, it's pretty clear that previous forecasts were too optimistic. What's more, we've spotted several possible issues with SilverBow Resources' business, like a weak balance sheet. Learn more, and discover the 4 other concerns we've identified, for free on our platform here.
You can also see our analysis of SilverBow Resources' Board and CEO remuneration and experience, and whether company insiders have been buying stock.
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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. Thank you for reading.
