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888 Holdings plc (LON:888) shareholders will have a reason to smile today, with the analysts making substantial upgrades to this year's forecasts. Consensus estimates suggest investors could expect greatly increased statutory revenues and earnings per share, with analysts modelling a real improvement in business performance. Investors have been pretty optimistic on 888 Holdings too, with the stock up 14% to UK£3.78 over the past week. We'll be curious to see if these new estimates convince the market to lift the stock price higher still.
Following the latest upgrade, 888 Holdings' nine analysts currently expect revenues in 2021 to be US$864m, approximately in line with the last 12 months. Statutory earnings per share are presumed to jump 656% to US$0.23. Before this latest update, the analysts had been forecasting revenues of US$785m and earnings per share (EPS) of US$0.21 in 2021. There has definitely been an improvement in perception recently, with the analysts substantially increasing both their earnings and revenue estimates.
With these upgrades, we're not surprised to see that the analysts have lifted their price target 14% to US$5.64 per share. 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. Currently, the most bullish analyst values 888 Holdings at US$4.20 per share, while the most bearish prices it at US$3.58. With such a narrow range of valuations, analysts apparently share similar views on what they think the business is worth.
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. We would highlight that 888 Holdings' revenue growth is expected to slow, with the forecast 1.7% annualised growth rate until the end of 2021 being well below the historical 8.0% p.a. growth over the last five years. Compare this against other companies (with analyst forecasts) in the industry, which are in aggregate expected to see revenue growth of 13% annually. So it's pretty clear that, while revenue growth is expected to slow down, the wider industry is also expected to grow faster than 888 Holdings.
The Bottom Line
The most important thing to take away from this upgrade is that analysts upgraded their earnings per share estimates for this year, expecting improving business conditions. Fortunately, they also upgraded their revenue estimates, and are forecasting revenues to grow slower than the wider market. With a serious upgrade to expectations and a rising price target, it might be time to take another look at 888 Holdings.
Still, the long-term prospects of the business are much more relevant than next year's earnings. We have estimates - from multiple 888 Holdings 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 upgrading their estimates. So you may also wish to search this free list of stocks that insiders are buying.
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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