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Analysts Have Been Trimming Their Service Properties Trust (NASDAQ:SVC) Price Target After Its Latest Report

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One of the biggest stories of last week was how Service Properties Trust (NASDAQ:SVC) shares plunged 24% in the week since its latest first-quarter results, closing yesterday at US$4.75. Revenues were in line with expectations, at US$484m, while statutory losses ballooned to US$0.20 per share. The 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. We've gathered the most recent statutory forecasts to see whether the analysts have changed their earnings models, following these results.

Check out our latest analysis for Service Properties Trust

NasdaqGS:SVC Past and Future Earnings May 14th 2020
NasdaqGS:SVC Past and Future Earnings May 14th 2020

After the latest results, the consensus from Service Properties Trust's two analysts is for revenues of US$1.67b in 2020, which would reflect a concerning 27% decline in sales compared to the last year of performance. The company is forecast to report a statutory loss of US$1.52 in 2020, a sharp decline from a profit over the last year. In the lead-up to this report, the analysts had been modelling revenues of US$1.49b and earnings per share (EPS) of US$1.51 in 2020. Yet despite forecasts for higher revenue, the analysts have cut their earnings estimates from a profit to a loss. So it seems there's been a pretty clear dip in sentiment, following the latest results.

It will come as no surprise that expanding losses caused the consensus price target to fall 8.0% to US$8.17 with the analysts implicitly ranking ongoing losses as a greater concern than growing revenues.

These estimates are interesting, but it can be useful to paint some more broad strokes when seeing how forecasts compare, both to the Service Properties Trust's past performance and to peers in the same industry. These estimates imply that sales are expected to slow, with a forecast revenue decline of 27%, a significant reduction from annual growth of 5.0% over the last five years. By contrast, our data suggests that other companies (with analyst coverage) in the same industry are forecast to see their revenue grow 5.1% annually for the foreseeable future. It's pretty clear that Service Properties Trust's revenues are expected to perform substantially worse than the wider industry.

The Bottom Line

The biggest low-light for us was that the forecasts for Service Properties Trust dropped from profits to a loss next year. They also upgraded their revenue estimates for next year, even though sales are expected to grow slower than the wider industry. Furthermore, the analysts also cut their price targets, suggesting that the latest news has led to greater pessimism about the intrinsic value of the business.

Keeping that in mind, we still think that the longer term trajectory of the business is much more important for investors to consider. We have analyst estimates for Service Properties Trust going out as far as 2022, and you can see them free on our platform here.

However, before you get too enthused, we've discovered 4 warning signs for Service Properties Trust (1 is potentially serious!) that you should be aware of.

If you spot an error that warrants correction, please contact the editor at editorial-team@simplywallst.com. 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. Simply Wall St has no position in the stocks mentioned.

We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Thank you for reading.