Today is shaping up negative for Ayr Strategies Inc. (CSE:AYR.A) shareholders, with the analysts delivering a substantial negative revision to this year's forecasts. Revenue and earnings per share (EPS) forecasts were both revised downwards, with the analysts seeing grey clouds on the horizon. Surprisingly the share price has been buoyant, rising 19% to US$10.93 in the past 7 days. 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 downgrade, the latest consensus from Ayr Strategies' six analysts is for revenues of US$137m in 2020, which would reflect a huge 26% improvement in sales compared to the last 12 months. The losses are expected to disappear over the next year or so, with forecasts for a profit of US$0.053 per share this year. Previously, the analysts had been modelling revenues of US$184m and earnings per share (EPS) of US$0.40 in 2020. It looks like analyst sentiment has declined substantially, with a pretty serious reduction to revenue estimates and a pretty serious decline to earnings per share numbers as well.
Of course, another way to look at these forecasts is to place them into context against the industry itself. It's pretty clear that there is an expectation that Ayr Strategies' revenue growth will slow down substantially, with revenues next year expected to grow 26%, compared to a historical growth rate of 1888% over the past year. Compare this against other companies (with analyst forecasts) in the industry, which are in aggregate expected to see revenue growth of 33% next year. Factoring in the forecast slowdown in growth, it seems obvious that Ayr Strategies is also expected to grow slower than other industry participants.
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 Ayr Strategies. Regrettably, they also downgraded their revenue estimates, and the latest forecasts imply the business will grow sales slower than the wider market. After a cut like that, investors could be forgiven for thinking analysts are a lot more bearish on Ayr Strategies, and a few readers might choose to steer clear of the stock.
Still, the long-term prospects of the business are much more relevant than next year's earnings. We have estimates - from multiple Ayr Strategies analysts - going out to 2023, 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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