As you might know, Chicken Soup for the Soul Entertainment, Inc. (NASDAQ:CSSE) last week released its latest first-quarter, and things did not turn out so great for shareholders. It was a pretty negative result overall, with revenues of US$14m missing analyst predictions by 9.2%. Worse, the business reported a statutory loss of US$0.95 per share, much larger than the analysts had forecast prior to the result. 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. Readers will be glad to know we've aggregated the latest statutory forecasts to see whether the analysts have changed their mind on Chicken Soup for the Soul Entertainment after the latest results.
Taking into account the latest results, Chicken Soup for the Soul Entertainment's five analysts currently expect revenues in 2020 to be US$66.8m, approximately in line with the last 12 months. Losses are forecast to narrow 5.7% to US$2.75 per share. Before this latest report, the consensus had been expecting revenues of US$79.6m and US$2.48 per share in losses. There's been a definite change in sentiment in this update, with the analysts administering a notable cut to next year's revenue estimates, while at the same time increasing their loss per share forecasts.
There was no major change to the consensus price target of US$19.75, signalling that the business is performing roughly in line with expectations, despite lower earnings per share forecasts. That's not the only conclusion we can draw from this data however, as some investors also like to consider the spread in estimates when evaluating analyst price targets. Currently, the most bullish analyst values Chicken Soup for the Soul Entertainment at US$27.00 per share, while the most bearish prices it at US$12.00. 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.
Of course, another way to look at these forecasts is to place them into context against the industry itself. We would highlight that Chicken Soup for the Soul Entertainment's revenue growth is expected to slow, with forecast 0.6% increase next year well below the historical 69%p.a. growth over the last three years. Compare this against other companies (with analyst forecasts) in the industry, which are in aggregate expected to see revenue growth of 13% next year. So it's pretty clear that, while revenue growth is expected to slow down, the wider industry is also expected to grow faster than Chicken Soup for the Soul Entertainment.
The Bottom Line
The most important thing to note is the forecast of increased losses next year, suggesting all may not be well at Chicken Soup for the Soul Entertainment. On the negative side, they also downgraded their revenue estimates, and forecasts imply revenues will perform worse than the wider industry. There was no real change to the consensus price target, suggesting that the intrinsic value of the business has not undergone any major changes with the latest estimates.
With that in mind, we wouldn't be too quick to come to a conclusion on Chicken Soup for the Soul Entertainment. Long-term earnings power is much more important than next year's profits. We have forecasts for Chicken Soup for the Soul Entertainment going out to 2024, and you can see them free on our platform here.
However, before you get too enthused, we've discovered 4 warning signs for Chicken Soup for the Soul Entertainment (1 is a bit unpleasant!) that you should be aware of.
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