One of the biggest stories of last week was how Preferred Apartment Communities, Inc. (NYSE:APTS) shares plunged 20% in the week since its latest yearly results, closing yesterday at US$10.00. Revenues came in at US$470m, in line with forecasts and the company reported a statutory loss of US$2.73 per share, roughly in line with expectations. Analysts typically update their forecasts at each earnings report, and we can judge from their estimates whether their view of the company has changed or if there are any new concerns to be aware of. With this in mind, we've gathered the latest statutory forecasts to see what analysts are expecting for next year.
Taking into account the latest results, the most recent consensus for Preferred Apartment Communities from three analysts is for revenues of US$505.6m in 2020, which is a reasonable 7.5% increase on its sales over the past 12 months. Losses are expected to be contained, narrowing 13% from last year to US$3.08, on a statutory basis. Before this earnings announcement, analysts had been forecasting revenues of US$525.6m and losses of US$2.83 per share in 2020. While revenue forecasts have been revised downwards, analysts look to have become more optimistic on the company's earnings power, given the to earnings per share forecasts.
The consensus price target fell 20% to US$11.90, with analysts clearly concerned about the company following the weaker revenue and earnings outlook. 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. Currently, the most bullish analyst values Preferred Apartment Communities at US$14.00 per share, while the most bearish prices it at US$10.00. These price targets show that analysts do have some differing views on the business, but the estimates do not vary enough to suggest to us that some are betting on wild success or utter failure.
In addition, we can look to Preferred Apartment Communities's past performance and see whether business is expected to improve, and if the company is expected to perform better than wider market. We would highlight that Preferred Apartment Communities's revenue growth is expected to slow, with forecast 7.5% increase next year well below the historical 35%p.a. growth over the last five years. By way of comparison, other companies in this market with analyst coverage, are forecast to grow their revenue at 4.9% next year. Even after the forecast slowdown in growth, it seems obvious that analysts still thinkPreferred Apartment Communities will grow faster than the wider market.
The Bottom Line
The highlight for us was that the consensus reduced its estimated losses next year, perhaps suggesting Preferred Apartment Communities is moving incrementally towards profitability. Regrettably, they also downgraded their revenue estimates, but the latest forecasts still imply the business will grow faster than the wider market. The consensus price target fell measurably, with analysts seemingly not reassured by the latest results, leading to a lower estimate of Preferred Apartment Communities's future valuation.
Even so, the longer term trajectory of the business is much more important for the value creation of shareholders. We have forecasts for Preferred Apartment Communities going out to 2024, and you can see them free on our platform here.
You can also see whether Preferred Apartment Communities is carrying too much debt, and whether its balance sheet is healthy, for free on our platform here.
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