Today is shaping up negative for a.k.a. Brands Holding Corp. (NYSE:AKA) shareholders, with the analysts delivering a substantial negative revision to this year's forecasts. Revenue estimates were cut sharply as analysts signalled a weaker outlook - perhaps a sign that investors should temper their expectations as well.
Following the downgrade, the consensus from nine analysts covering a.k.a. Brands Holding is for revenues of US$630m in 2022, implying a perceptible 3.3% decline in sales compared to the last 12 months. Previously, the analysts had been modelling revenues of US$704m and earnings per share (EPS) of US$0.08 in 2022. Indeed, we can see that the analysts are a lot more bearish about a.k.a. Brands Holding's prospects, administering a measurable cut to revenue estimates and slashing their EPS estimates to boot.
Notably, the analysts have cut their price target 39% to US$3.90, suggesting concerns around a.k.a. Brands Holding's valuation. It could also be instructive to look at the range of analyst estimates, to evaluate how different the outlier opinions are from the mean. Currently, the most bullish analyst values a.k.a. Brands Holding at US$10.00 per share, while the most bearish prices it at US$2.20. As you can see the range of estimates is wide, with the lowest valuation coming in at less than half the most bullish estimate, suggesting there are some strongly diverging views on how think this business will perform. As a result it might not be possible to derive much meaning from the consensus price target, which is after all just an average of this wide range of estimates.
Looking at the bigger picture now, one of the ways we can make sense of these forecasts is to see how they measure up against both past performance and industry growth estimates. These estimates imply that sales are expected to slow, with a forecast annualised revenue decline of 6.4% by the end of 2022. This indicates a significant reduction from annual growth of 85% over the last year. By contrast, our data suggests that other companies (with analyst coverage) in the same industry are forecast to see their revenue grow 13% annually for the foreseeable future. So although its revenues are forecast to shrink, this cloud does not come with a silver lining - a.k.a. Brands Holding is expected to lag the wider industry.
The Bottom Line
The biggest issue in the new estimates is that analysts have reduced their earnings per share estimates, suggesting business headwinds lay ahead for a.k.a. Brands Holding. Unfortunately analysts also downgraded their revenue estimates, and industry data suggests that a.k.a. Brands Holding's revenues are expected to grow slower than the wider market. The consensus price target fell measurably, with analysts seemingly not reassured by recent business developments, leading to a lower estimate of a.k.a. Brands Holding's future valuation. Overall, given the drastic downgrade to this year's forecasts, we'd be feeling a little more wary of a.k.a. Brands Holding going forwards.
Even so, the longer term trajectory of the business is much more important for the value creation of shareholders. At Simply Wall St, we have a full range of analyst estimates for a.k.a. Brands Holding going out to 2024, and you can see them free on our platform here.
Of course, seeing company management invest large sums of money in a stock can be just as useful as knowing whether analysts are downgrading their estimates. So you may also wish to search this free list of stocks that insiders are buying.
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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. 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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