One of the biggest stories of last week was how Golden Entertainment, Inc. (NASDAQ:GDEN) shares plunged 28% in the week since its latest full-year results, closing yesterday at US$8.86. Revenues came in at US$973m, in line with forecasts and the company reported a statutory loss of US$1.43 per share, roughly in line with expectations. 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've gathered the most recent statutory forecasts to see whether analysts have changed their earnings models, following these results.
Taking into account the latest results, the current consensus, from the five analysts covering Golden Entertainment, is for revenues of US$947.0m in 2020, which would reflect a perceptible 2.7% reduction in Golden Entertainment's sales over the past 12 months. Per-share statutory losses are expected to explode, reaching US$0.87 per share. Before this latest report, the consensus had been expecting revenues of US$997.3m and US$0.08 per share in losses. From this we can that analyst sentiment has definitely become more bearish after the latest results, leading to lower revenue forecasts and a large cut to earnings per share estimates.
The consensus price target fell 11% to US$20.40, with analysts clearly concerned about the company following the weaker revenue and earnings outlook. 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. There are some variant perceptions on Golden Entertainment, with the most bullish analyst valuing it at US$26.00 and the most bearish at US$14.00 per share. There are definitely some different views on the stock, but the range of estimates is not wide enough as to imply that the situation is unforecastable, in our view.
Zooming out to look at the bigger picture now, one of the ways we can make sense of these forecasts is to see how they measure up both against past performance, and against industry growth estimates. These estimates imply that sales are expected to slow, with a forecast revenue decline of 2.7% a significant reduction from annual growth of 41% 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 9.2% next year. So although its revenues are forecast to shrink, this cloud does not come with a silver lining - analysts also expect Golden Entertainment to grow slower than the wider market.
The Bottom Line
The highlight for us was that the consensus reduced its estimated losses next year, perhaps suggesting Golden Entertainment is moving incrementally towards profitability. Unfortunately, analysts also downgraded their revenue estimates, and our data indicates revenues are expected to perform worse than the wider market. Even so, earnings per share are more important to the intrinsic value of the business. The consensus price target fell measurably, with analysts seemingly not reassured by the latest results, leading to a lower estimate of Golden Entertainment's future valuation.
Even so, the longer term trajectory of the business is much more important for the value creation of shareholders. We have forecasts for Golden Entertainment going out to 2022, and you can see them free on our platform here.
You can also view our analysis of Golden Entertainment's balance sheet, and whether we think Golden Entertainment is carrying too much debt, for free on our platform here.
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