U.S. markets closed
  • S&P 500

    4,246.44
    +21.65 (+0.51%)
     
  • Dow 30

    33,945.58
    +68.61 (+0.20%)
     
  • Nasdaq

    14,253.27
    +111.79 (+0.79%)
     
  • Russell 2000

    2,295.95
    +9.85 (+0.43%)
     
  • Crude Oil

    73.08
    -0.58 (-0.79%)
     
  • Gold

    1,778.10
    -4.80 (-0.27%)
     
  • Silver

    25.83
    -0.20 (-0.77%)
     
  • EUR/USD

    1.1945
    +0.0020 (+0.17%)
     
  • 10-Yr Bond

    1.4720
    -0.0120 (-0.81%)
     
  • GBP/USD

    1.3951
    +0.0018 (+0.13%)
     
  • USD/JPY

    110.6720
    +0.3740 (+0.34%)
     
  • BTC-USD

    32,706.94
    +62.62 (+0.19%)
     
  • CMC Crypto 200

    777.33
    -16.99 (-2.14%)
     
  • FTSE 100

    7,090.01
    +27.72 (+0.39%)
     
  • Nikkei 225

    28,884.13
    +873.20 (+3.12%)
     

Analysts Just Shaved Their easyJet plc (LON:EZJ) Forecasts Dramatically

  • Oops!
    Something went wrong.
    Please try again later.
  • Oops!
    Something went wrong.
    Please try again later.
·3 min read
  • Oops!
    Something went wrong.
    Please try again later.
  • Oops!
    Something went wrong.
    Please try again later.

The analysts covering easyJet plc (LON:EZJ) delivered a dose of negativity to shareholders today, by making a substantial revision to their statutory forecasts for this year. Both revenue and earnings per share (EPS) estimates were cut sharply as analysts factored in the latest outlook for the business, concluding that they were too optimistic previously. Shares are up 6.9% to UK£9.87 in the past week. We'd be curious to see if the downgrade is enough to reverse investor sentiment on the business.

Following the latest downgrade, the current consensus, from the 20 analysts covering easyJet, is for revenues of UK£2.0b in 2021, which would reflect a disturbing 34% reduction in easyJet's sales over the past 12 months. Losses are predicted to fall substantially, shrinking 41% to UK£1.56. Yet prior to the latest estimates, the analysts had been forecasting revenues of UK£2.4b and losses of UK£1.37 per share in 2021. 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 easyJet

earnings-and-revenue-growth
earnings-and-revenue-growth

The consensus price target was broadly unchanged at UK£9.99, perhaps implicitly signalling that the weaker earnings outlook is not expected to have a long-term impact on the valuation. That's not the only conclusion we can draw from this data however, as some investors also like to consider the spread in estimates when evaluating analyst price targets. Currently, the most bullish analyst values easyJet at UK£13.40 per share, while the most bearish prices it at UK£6.00. Note the wide gap in analyst price targets? This implies to us that there is a fairly broad range of possible scenarios for the underlying 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 34% by the end of 2021. This indicates a significant reduction from annual growth of 3.8% over the last five years. Compare this with our data, which suggests that other companies in the same industry are, in aggregate, expected to see their revenue grow 29% per year. It's pretty clear that easyJet's revenues are expected to perform substantially worse than the wider industry.

The Bottom Line

The most important thing to take away is that analysts increased their loss per share estimates for this year. Unfortunately analysts also downgraded their revenue estimates, and industry data suggests that easyJet's revenues are expected to grow slower than the wider market. The lack of change in the price target is puzzling in light of the downgrade but, with a serious decline expected this year, we wouldn't be surprised if investors were a bit wary of easyJet.

As you can see, the analysts clearly aren't bullish, and there might be good reason for that. We've identified some potential issues with easyJet's financials, such as dilutive stock issuance over the past year. For more information, you can click here to discover this and the 2 other concerns we've identified.

Of course, seeing company management invest large sums of money in a stock can be just as useful as knowing whether analysts are downgrading 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.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.