Chicken Soup for the Soul Entertainment, Inc. (NASDAQ:CSSE) shares fell 8.0% to US$8.93 in the week since its latest quarterly results. Revenues of US$17m missed forecasts by 20%, but at least losses were much smaller than expected, with per-share losses of US$1.11 coming in 974% smaller than what analysts had forecast. 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 thought readers would find it interesting to see analysts' latest post-earnings forecasts for next year.
After the latest results, the four analysts covering Chicken Soup for the Soul Entertainment are now predicting revenues of US$98.6m in 2020. If met, this would reflect a major 132% improvement in sales compared to the last 12 months. Chicken Soup for the Soul Entertainment is also expected to turn profitable, with earnings of US$0.13 per share. Before this earnings report, analysts had been forecasting revenues of US$101.0m and earnings per share (EPS) of US$0.46 in 2020. From this we can that analyst sentiment has definitely become more bearish after the latest results, leading to lower revenue forecasts and a pretty serious reduction to earnings per share estimates.
Analysts made no major changes to their price target of US$19.70, suggesting the downgrades are not expected to have a long-term impact on Chicken Soup for the Soul Entertainment's valuation. 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. There are some variant perceptions on Chicken Soup for the Soul Entertainment, with the most bullish analyst valuing it at US$25.50 and the most bearish at US$13.00 per share. Note the wide gap in analyst price targets? This implies to us that there is a fairly broad range of possible scenarios for the underlying business.
Further, we can compare these estimates to past performance, and see how Chicken Soup for the Soul Entertainment forecasts compare to the wider market's forecast performance. Analysts are definitely expecting Chicken Soup for the Soul Entertainment's growth to accelerate, with the forecast 132% growth ranking favourably alongside historical growth of 63% per annum over the past three years. Compare this with other companies in the same market, which are forecast to grow their revenue 11% next year. Factoring in the forecast acceleration in revenue, it's pretty clear that Chicken Soup for the Soul Entertainment is expected to grow much faster than its market.
The Bottom Line
The most important thing to take away is that analysts downgraded their earnings per share estimates, showing that there has been a clear decline in sentiment following these results. Unfortunately analysts also downgraded their revenue estimates, although industry data suggests that Chicken Soup for the Soul Entertainment's revenues are expected to grow faster than the wider market. The consensus price target held steady at US$19.70, with the latest estimates not enough to have an impact on analysts' estimated valuations.
Still, the long-term prospects of the business are much more relevant than next year's earnings. We have forecasts for Chicken Soup for the Soul Entertainment going out to 2023, and you can see them free on our platform here.
You can also see whether Chicken Soup for the Soul Entertainment is carrying too much debt, and whether its balance sheet is healthy, for free on our platform here.
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