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Celebrations may be in order for Naked Wines plc (LON:WINE) shareholders, with the analysts delivering a significant upgrade to their statutory estimates for the company. The analysts have sharply increased their revenue numbers, with a view that Naked Wines will make substantially more sales than they'd previously expected. Investors have been pretty optimistic on Naked Wines too, with the stock up 12% to UK£4.06 over the past week. Could this upgrade be enough to drive the stock even higher?
After the upgrade, the four analysts covering Naked Wines are now predicting revenues of UK£263m in 2021. If met, this would reflect a major 29% improvement in sales compared to the last 12 months. Losses are expected to turn into profits real soon, with the analysts forecasting UK£0.029 in per-share earnings. Previously, the analysts had been modelling revenues of UK£235m and earnings per share (EPS) of UK£0.029 in 2021. There's clearly been a surge in bullishness around the company's sales pipeline, even if there's no real change in earnings per share forecasts.
Analysts increased their price target 8.9% to UK£3.81, perhaps signalling that higher revenues are a strong leading indicator for Naked Wines's valuation. 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. Currently, the most bullish analyst values Naked Wines at UK£4.75 per share, while the most bearish prices it at UK£2.30. This is a fairly broad spread of estimates, suggesting that the analysts are forecasting a wide range of possible outcomes for the business.
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. The analysts are definitely expecting Naked Wines' growth to accelerate, with the forecast 29% growth ranking favourably alongside historical growth of 3.4% per annum over the past five years. By contrast, our data suggests that other companies (with analyst coverage) in a similar industry are forecast to grow their revenue at 1.3% per year. Factoring in the forecast acceleration in revenue, it's pretty clear that Naked Wines is expected to grow much faster than its industry.
The Bottom Line
The most important thing to take away is that there's been no major change in sentiment, with analysts reconfirming that earnings per share are expected to continue performing in line with their prior expectations. Fortunately, analysts also upgraded their revenue estimates, and our data indicates sales are expected to perform better than the wider market. There was also a nice increase in the price target, with analysts apparently feeling that the intrinsic value of the business is improving. Seeing the dramatic upgrade to this year's forecasts, it might be time to take another look at Naked Wines.
Still, the long-term prospects of the business are much more relevant than next year's earnings. At Simply Wall St, we have a full range of analyst estimates for Naked Wines going out to 2025, 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 upgrading their estimates. So you may also wish to search this free list of stocks that insiders are buying.
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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