Analysts Just Shaved Their Sunstone Hotel Investors, Inc. (NYSE:SHO) Forecasts Dramatically
Market forces rained on the parade of Sunstone Hotel Investors, Inc. (NYSE:SHO) shareholders today, when the analysts downgraded their forecasts for this year. Both revenue and earnings per share (EPS) forecasts went under the knife, suggesting the analysts have soured majorly on the business. Bidders are definitely seeing a different story, with the stock price of US$12.13 reflecting a 10% rise in the past week. Whether the downgrade will have a negative impact on demand for shares is yet to be seen.
Following the downgrade, the latest consensus from Sunstone Hotel Investors' eight analysts is for revenues of US$419m in 2021, which would reflect a major 56% improvement in sales compared to the last 12 months. Losses are predicted to fall substantially, shrinking 60% to US$0.78. Yet prior to the latest estimates, the analysts had been forecasting revenues of US$478m and losses of US$0.67 per share in 2021. So there's been quite a change-up of views after the recent consensus updates, with the analysts making a serious cut to their revenue forecasts while also expecting losses per share to increase.
See our latest analysis for Sunstone Hotel Investors
There was no major change to the consensus price target of US$11.69, signalling that the business is performing roughly in line with expectations, despite lower earnings per share forecasts. 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. The most optimistic Sunstone Hotel Investors analyst has a price target of US$15.00 per share, while the most pessimistic values it at US$10.00. Analysts definitely have varying views on the business, but the spread of estimates is not wide enough in our view to suggest that extreme outcomes could await Sunstone Hotel Investors shareholders.
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. One thing stands out from these estimates, which is that Sunstone Hotel Investors is forecast to grow faster in the future than it has in the past, with revenues expected to grow 56%. If achieved, this would be a much better result than the 11% annual decline over the past five years. By contrast, our data suggests that other companies (with analyst coverage) in the industry are forecast to see their revenue grow 5.6% per year. Not only are Sunstone Hotel Investors' revenues expected to improve, it seems that the analysts are also expecting it 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 Sunstone Hotel Investors. Unfortunately, analysts also downgraded their revenue estimates, although our data indicates revenues are expected to perform better 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 Sunstone Hotel Investors.
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 Sunstone Hotel Investors analysts - going out to 2023, and you can see them free on our platform here.
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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.
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