There's been a major selloff in Qutoutiao Inc. (NASDAQ:QTT) shares in the week since it released its full-year report, with the stock down 32% to US$3.29. Qutoutiao reported revenues of CN¥5.6b, in line with expectations, but it unfortunately also reported (statutory) losses of CN¥10.68 per share, which were slightly larger than expected. 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. So we gathered the latest post-earnings forecasts to see what estimates suggest is in store for next year.
After the latest results, the four analysts covering Qutoutiao are now predicting revenues of CN¥7.35b in 2020. If met, this would reflect a huge 32% improvement in sales compared to the last 12 months. Losses are predicted to fall substantially, shrinking 43% to CN¥6.04. Before this latest report, the consensus had been expecting revenues of CN¥7.42b and CN¥5.85 per share in losses. Overall it looks as though the analysts were a bit mixed on the latest consensus updates. Although sales forecasts held steady, the consensus also made a small dip in to its losses per share forecasts.
With the increase in forecast losses for next year, it's perhaps no surprise to see that the average price target dipped 33% to CN¥28.31, with the analysts signalling that growing losses would be a definite concern. 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 Qutoutiao at CN¥30.32 per share, while the most bearish prices it at CN¥21.10. As you can see, analysts are not all in agreement on the stock's future, but the range of estimates is still reasonably narrow, which could suggest that the outcome is not totally unpredictable.
One way to get more context on these forecasts is to look at how they compare to both past performance, and how other companies in the same industry are performing. It's pretty clear that there is an expectation that Qutoutiao's revenue growth will slow down substantially, with revenues next year expected to grow 32%, compared to a historical growth rate of 81% over the past three years. Juxtapose this against the other companies in the industry with analyst coverage, which are forecast to grow their revenues (in aggregate) 14% next year. Even after the forecast slowdown in growth, it seems obvious that Qutoutiao is also expected to grow faster than the wider industry.
The Bottom Line
The most important thing to take away is that the analysts increased their loss per share estimates for next year. Fortunately, they also reconfirmed their revenue numbers, suggesting sales are tracking in line with expectations - and our data suggests that revenues are expected to grow faster than the wider 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 forecasts for Qutoutiao going out to 2021, and you can see them free on our platform here.
However, before you get too enthused, we've discovered 3 warning signs for Qutoutiao (1 shouldn't be ignored!) that you should be aware of.
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