Drive Shack Inc. (NYSE:DS) Just Reported Earnings, And Analysts Cut Their Target Price
Drive Shack Inc. (NYSE:DS) investors will be delighted, with the company turning in some strong numbers with its latest results. The results overall were pretty good, with revenues of US$66m exceeding expectations and statutory losses coming in at justUS$0.16 per share, some 29% below what the analysts had forecast. This is an important time for investors, as they can track a company's performance in its report, look at what experts are forecasting for next year, and see if there has been any change to expectations for the business. Readers will be glad to know we've aggregated the latest statutory forecasts to see whether the analysts have changed their mind on Drive Shack after the latest results.
Check out our latest analysis for Drive Shack
Taking into account the latest results, the current consensus from Drive Shack's three analysts is for revenues of US$283.1m in 2021, which would reflect a substantial 22% increase on its sales over the past 12 months. Losses are predicted to fall substantially, shrinking 45% to US$0.72. Before this earnings announcement, the analysts had been modelling revenues of US$287.4m and losses of US$0.76 per share in 2021. So there seems to have been a moderate uplift in analyst sentiment with the latest consensus release, given the upgrade to loss per share forecasts for next year.
Even with the lower forecast losses, the analysts lowered their valuations, with the average price target falling 20% to US$4.00. It looks likethe analysts have become less optimistic about the overall business. 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. Currently, the most bullish analyst values Drive Shack at US$5.00 per share, while the most bearish prices it at US$3.00. This shows there is still a bit of diversity in estimates, but analysts don't appear to be totally split on the stock as though it might be a success or failure situation.
These estimates are interesting, but it can be useful to paint some more broad strokes when seeing how forecasts compare, both to the Drive Shack's past performance and to peers in the same industry. One thing stands out from these estimates, which is that Drive Shack is forecast to grow faster in the future than it has in the past, with revenues expected to grow 22%. If achieved, this would be a much better result than the 2.5% annual decline over the past five years. Compare this against analyst estimates for the wider industry, which suggest that (in aggregate) industry revenues are expected to grow 22% next year. So it looks like Drive Shack is expected to grow at about the same rate as the wider industry.
The Bottom Line
The most obvious conclusion is that the analysts made no changes to their forecasts for a loss next year. Happily, there were no real changes to sales forecasts, with the business still expected to grow in line with the overall industry. Furthermore, the analysts also cut their price targets, suggesting that the latest news has led to greater pessimism about the intrinsic value of the business.
Keeping that in mind, we still think that the longer term trajectory of the business is much more important for investors to consider. We have estimates - from multiple Drive Shack analysts - going out to 2023, and you can see them free on our platform here.
We don't want to rain on the parade too much, but we did also find 3 warning signs for Drive Shack (1 is significant!) that you need to be mindful of.
This article by Simply Wall St is general in nature. 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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