Yahoo Finance Need To Know: Analysts Just Made A Substantial Cut To Their Red Rock Resorts, Inc. (NASDAQ:RRR) Estimates
Today is shaping up negative for Red Rock Resorts, Inc. (NASDAQ:RRR) shareholders, with the analysts delivering a substantial negative revision to this year's forecasts. Both revenue and earnings per share (EPS) estimates were cut sharply as the analysts factored in the latest outlook for the business, concluding that they were too optimistic previously. Investors however, have been notably more optimistic about Red Rock Resorts recently, with the stock price up a whopping 31% to US$11.75 in the past week. With such a sharp increase, it seems brokers may have seen something that is not yet being priced in by the wider market.
Following the latest downgrade, the ten analysts covering Red Rock Resorts provided consensus estimates of US$980m revenue in 2020, which would reflect a concerning 45% decline on its sales over the past 12 months. Losses are supposed to balloon 48% to US$3.54 per share. Yet prior to the latest estimates, the analysts had been forecasting revenues of US$1.1b and losses of US$1.52 per share in 2020. So there's been quite a change-up of views after the recent consensus updates, with the analysts making a serious cut to their revenue forecasts while also expecting losses per share to increase.
Check out our latest analysis for Red Rock Resorts
The consensus price target fell 39% to US$13.15, with the analysts clearly concerned about the company following the weaker revenue and earnings outlook. There's another way to think about price targets though, and that's to look at the range of price targets put forward by analysts, because a wide range of estimates could suggest a diverse view on possible outcomes for the business. There are some variant perceptions on Red Rock Resorts, with the most bullish analyst valuing it at US$18.00 and the most bearish at US$10.00 per share. Note the wide gap in analyst price targets? This implies to us that there is a fairly broad range of possible scenarios for the underlying business.
These estimates are interesting, but it can be useful to paint some more broad strokes when seeing how forecasts compare, both to the Red Rock Resorts' past performance and to peers in the same industry. We would highlight that sales are expected to reverse, with the forecast 45% revenue decline a notable change from historical growth of 7.2% over the last five years. Compare this with our data, which suggests that other companies in the same industry are, in aggregate, expected to see their revenue grow 15% next year. It's pretty clear that Red Rock Resorts' revenues are expected to perform substantially worse than the wider industry.
The Bottom Line
The most important thing to take away is that analysts increased their loss per share estimates for this year. Unfortunately analysts also downgraded their revenue estimates, and industry data suggests that Red Rock Resorts' revenues are expected to grow slower than the wider market. Given the scope of the downgrades, it would not be a surprise to see the market become more wary of the business.
Even so, the longer term trajectory of the business is much more important for the value creation of shareholders. We have estimates - from multiple Red Rock Resorts analysts - going out to 2023, and you can see them free on our platform here.
Another way to search for interesting companies that could be reaching an inflection point is to track whether management are buying or selling, with our free list of growing companies that insiders are buying.
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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. Thank you for reading.
