One thing we could say about the analysts on Cumulus Media Inc. (NASDAQ:CMLS) - they aren't optimistic, having just made a major negative revision to their near-term (statutory) forecasts for the organization. Both revenue and earnings per share (EPS) forecasts went under the knife, suggesting analysts have soured majorly on the business.
Following the latest downgrade, the current consensus, from the three analysts covering Cumulus Media, is for revenues of US$859m in 2020, which would reflect a considerable 20% reduction in Cumulus Media's sales over the past 12 months. Following this this downgrade, earnings are now expected to tip over into loss-making territory, with the analysts forecasting losses of US$3.20 per share in 2020. Before this latest update, the analysts had been forecasting revenues of US$1.0b and earnings per share (EPS) of US$0.49 in 2020. So we can see that the consensus has become notably more bearish on Cumulus Media's outlook with these numbers, making a measurable cut to this year's revenue estimates. Furthermore, they expect the business to be loss-making this year, compared to their previous forecasts of a profit.
The consensus price target fell 51% to US$5.67, with the analysts clearly concerned about the company following the weaker revenue and earnings outlook. 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. The most optimistic Cumulus Media analyst has a price target of US$10.00 per share, while the most pessimistic values it at US$3.00. With such a wide range in price targets, the analysts are almost certainly betting on widely diverse outcomes for the underlying business. 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.
Taking a look at the bigger picture now, one of the ways we can understand these forecasts is to see how they compare to both past performance and industry growth estimates. Over the past five years, revenues have declined around 1.6% annually. Worse, forecasts are essentially predicting the decline to accelerate, with the estimate for a 20% decline in revenue next year. Compare this against analyst estimates for companies in the wider industry, which suggest that revenues (in aggregate) are expected to grow 4.2% next year. So while a broad number of companies are forecast to decline, unfortunately Cumulus Media is expected to see its sales affected worse than other companies in the industry.
The Bottom Line
The most important thing to take away is that analysts are expecting Cumulus Media to become unprofitable 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 Cumulus Media.
As you can see, the analysts clearly aren't bullish, and there might be good reason for that. We've identified some potential issues with Cumulus Media's financials, such as dilutive stock issuance over the past year. For more information, you can click here to discover this and the 5 other concerns we've identified.
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