It's shaping up to be a tough period for Ashford Hospitality Trust, Inc. (NYSE:AHT), which a week ago released some disappointing quarterly results that could have a notable impact on how the market views the stock. Earnings fell badly short of analyst estimates, with US$282m revenue falling -12% short, and statutory losses of US$0.94 per share being -17% greater than forecast. 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. So we gathered the latest post-earnings forecasts to see what estimates suggest is in store for next year.
Taking into account the latest results, the five analysts covering Ashford Hospitality Trust provided consensus estimates of US$1.10b revenue in 2020, which would reflect a stressful 23% decline on its sales over the past 12 months. Per-share losses are expected to explode, reaching US$3.84 per share. Yet prior to the latest earnings, the analysts had been forecasting revenues of US$1.10b and losses of US$0.62 per share in 2020. So it's pretty clear the analysts have mixed opinions on Ashford Hospitality Trust even after this update; although they reconfirmed their revenue numbers, it came at the cost of a per-share losses.
With the increase in forecast losses for next year, it's perhaps no surprise to see that the average price target dipped 9.3% to US$1.37, with the analysts signalling that growing losses would be a definite concern. 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. The most optimistic Ashford Hospitality Trust analyst has a price target of US$2.00 per share, while the most pessimistic values it at US$0.60. As you can see the range of estimates is wide, with the lowest valuation coming in at less than half the most bullish estimate, suggesting there are some strongly diverging views on how analysts think this business will perform. As a result it might not be a great idea to make decisions based on the consensus price target, which is after all just an average of this wide range of estimates.
Of course, another way to look at these forecasts is to place them into context against the industry itself. We would highlight that sales are expected to reverse, with the forecast 23% revenue decline a notable change from historical growth of 4.8% 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 5.0% next year. So although its revenues are forecast to shrink, this cloud does not come with a silver lining - Ashford Hospitality Trust is expected to lag the wider industry.
The Bottom Line
The most important thing to note is the forecast of increased losses next year, suggesting all may not be well at Ashford Hospitality Trust. On the plus side, there were no major changes to revenue estimates; although forecasts imply revenues will perform worse 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.
With that said, the long-term trajectory of the company's earnings is a lot more important than next year. We have forecasts for Ashford Hospitality Trust going out to 2022, and you can see them free on our platform here.
Even so, be aware that Ashford Hospitality Trust is showing 4 warning signs in our investment analysis , you should know about...
Love or hate this article? Concerned about the content? Get in touch with us directly. Alternatively, email email@example.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. 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. Thank you for reading.