Bearish: Analysts Just Cut Their Kogan.com Ltd (ASX:KGN) Revenue and EPS estimates
Today is shaping up negative for Kogan.com Ltd (ASX:KGN) shareholders, with the analysts delivering a substantial negative revision to this year's forecasts. Both revenue and earnings per share (EPS) forecasts went under the knife, suggesting analysts have soured majorly on the business.
After the downgrade, the consensus from Kogan.com's nine analysts is for revenues of AU$624m in 2023, which would reflect a chunky 13% decline in sales compared to the last year of performance. Losses are predicted to fall substantially, shrinking 64% to AU$0.12. Yet prior to the latest estimates, the analysts had been forecasting revenues of AU$703m and losses of AU$0.045 per share in 2023. 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 Kogan.com
The consensus price target fell 7.6% to AU$4.34, implicitly signalling that lower earnings per share are a leading indicator for Kogan.com's valuation. The consensus price target is just an average of individual analyst targets, so - it could be handy to see how wide the range of underlying estimates is. There are some variant perceptions on Kogan.com, with the most bullish analyst valuing it at AU$11.70 and the most bearish at AU$2.73 per share. So we wouldn't be assigning too much credibility to analyst price targets in this case, because there are clearly some widely differing views on what kind of performance this business can generate. With this in mind, we wouldn't rely too heavily on the consensus price target, as it is just an average and analysts clearly have some deeply divergent views on the business.
Looking at the bigger picture now, one of the ways we can make sense of these forecasts is to see how they measure up against both past performance and industry growth estimates. These estimates imply that sales are expected to slow, with a forecast annualised revenue decline of 13% by the end of 2023. This indicates a significant reduction from annual growth of 19% 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 11% annually for the foreseeable future. So although its revenues are forecast to shrink, this cloud does not come with a silver lining - Kogan.com is expected to lag 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. Regrettably, they also downgraded their revenue estimates, and the latest forecasts imply the business will grow sales slower than the wider market. After such a stark change in sentiment from analysts, we'd understand if readers now felt a bit wary of Kogan.com.
Still, the long-term prospects of the business are much more relevant than next year's earnings. We have estimates - from multiple Kogan.com analysts - going out to 2025, and you can see them free on our platform here.
Another way to search for interesting companies that could be reaching an inflection point is to track whether management are buying or selling, with our free list of growing companies that insiders are buying.
Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.
This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. 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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