There's been a major selloff in Cars.com Inc. (NYSE:CARS) shares in the week since it released its annual report, with the stock down 32% to US$8.22. The results overall were pretty much dead in line with analyst forecasts; revenues were US$607m and statutory losses were US$6.65 per share. 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 analysts' statutory forecasts suggest is in store for next year.
Taking into account the latest results, Cars.com's six analysts currently expect revenues in 2020 to be US$598.1m, approximately in line with the last 12 months. Earnings are expected to improve, with Cars.com forecast to report a statutory profit of US$0.15 per share. Before this earnings report, analysts had been forecasting revenues of US$617.0m and earnings per share (EPS) of US$0.36 in 2020. Analysts seem less optimistic after the recent results, reducing their sales forecasts and making a pretty serious reduction to earnings per share forecasts.
The consensus price target fell 24% to US$12.67, with the weaker earnings outlook clearly leading analyst valuation estimates. 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 Cars.com at US$20.00 per share, while the most bearish prices it at US$9.00. This is a fairly broad spread of estimates, suggesting that analysts are forecasting a wide range of possible outcomes for the business.
It can be useful to take a broader overview by seeing how analyst forecasts compare, both to the Cars.com's past performance and to peers in the same market. We would highlight that sales are expected to reverse, with the forecast 1.4% revenue decline a notable change from historical growth of 2.6% over the last five years. Compare this with our data, which suggests that other companies in the same market are, in aggregate, expected to see their revenue grow 14% next year. It's pretty clear that Cars.com's revenues are expected to perform substantially worse than the wider market.
The Bottom Line
The biggest concern with the new estimates is that analysts have reduced their earnings per share estimates, suggesting business headwinds could lay ahead for Cars.com. On the negative side, they also downgraded their revenue estimates, and forecasts imply revenues will perform worse 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 Cars.com's future valuation.
Still, the long-term prospects of the business are much more relevant than next year's earnings. At Simply Wall St, we have a full range of analyst estimates for Cars.com going out to 2022, and you can see them free on our platform here..
You can also see whether Cars.com is carrying too much debt, and whether its balance sheet is healthy, for free on our platform here.
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