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Callon Petroleum Company (NYSE:CPE) shareholders will have a reason to smile today, with the analysts making substantial upgrades to this year's statutory forecasts. The consensus estimated revenue numbers rose, with their view now clearly much more bullish on the company's business prospects. Investor sentiment seems to be improving too, with the share price up 9.7% to US$27.09 over the past 7 days. It will be interesting to see if this latest upgrade is enough to kickstart further buying interest in the stock.
Following the upgrade, the most recent consensus for Callon Petroleum from its seven analysts is for revenues of US$1.2b in 2021 which, if met, would be a solid 20% increase on its sales over the past 12 months. Prior to the latest estimates, the analysts were forecasting revenues of US$1.1b in 2021. It looks like there's been a clear increase in optimism around Callon Petroleum, given the substantial gain in revenue forecasts.
Additionally, the consensus price target for Callon Petroleum increased 13% to US$18.07, showing a clear increase in optimism from the analysts involved. 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 Callon Petroleum at US$31.00 per share, while the most bearish prices it at US$7.00. 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. It's pretty clear that there is an expectation that Callon Petroleum's revenue growth will slow down substantially, with revenues to the end of 2021 expected to display 20% growth on an annualised basis. This is compared to a historical growth rate of 36% over the past five years. By way of comparison, the other companies in this industry with analyst coverage are forecast to grow their revenue at 11% annually. Even after the forecast slowdown in growth, it seems obvious that Callon Petroleum is also expected to grow faster than the wider industry.
The Bottom Line
The most important thing to take away from this upgrade is that analysts lifted their revenue estimates for this year. They're also forecasting more rapid revenue growth than the wider market. There was also a nice increase in the price target, with analysts apparently feeling that the intrinsic value of the business is improving. Seeing the dramatic upgrade to this year's forecasts, it might be time to take another look at Callon Petroleum.
It's great to see the analysts upgrading their estimates, but the biggest highlight to us is that the business is expected to become profitable in the foreseeable future. You can learn more about these forecasts, for free on our platform here.
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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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