Today is shaping up negative for Guotai Junan International Holdings Limited (HKG:1788) 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 current consensus from Guotai Junan International Holdings' three analysts is for revenues of HK$3.9b in 2022 which - if met - would reflect a substantial 20% increase on its sales over the past 12 months. Prior to the latest estimates, the analysts were forecasting revenues of HK$4.3b in 2022. It looks like forecasts have become a fair bit less optimistic on Guotai Junan International Holdings, given the substantial drop in revenue estimates.

Check out our latest analysis for Guotai Junan International Holdings

We'd point out that there was no major changes to their price target of HK$1.38, suggesting the latest estimates were not enough to shift their view on the value of the business. 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. The most optimistic Guotai Junan International Holdings analyst has a price target of HK$1.66 per share, while the most pessimistic values it at HK$0.90. These price targets show that analysts do have some differing views on the business, but the estimates do not vary enough to suggest to us that some are betting on wild success or utter failure.

Another way we can view these estimates is in the context of the bigger picture, such as how the forecasts stack up against past performance, and whether forecasts are more or less bullish relative to other companies in the industry. It's clear from the latest estimates that Guotai Junan International Holdings' rate of growth is expected to accelerate meaningfully, with the forecast 20% annualised revenue growth to the end of 2022 noticeably faster than its historical growth of 10% p.a. over the past five years. Compare this with other companies in the same industry, which are forecast to grow their revenue 14% annually. Factoring in the forecast acceleration in revenue, it's pretty clear that Guotai Junan International Holdings is expected to grow much faster than its industry.

The Bottom Line

The most important thing to take away is that analysts cut their revenue estimates for this year. The analysts also expect revenues to grow faster than the wider market. Often, one downgrade can set off a daisy-chain of cuts, especially if an industry is in decline. So we wouldn't be surprised if the market became a lot more cautious on Guotai Junan International Holdings after today.

Still got questions? We have estimates for Guotai Junan International Holdings from its three analysts out until 2024, and you can see them free on our platform here.

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