Vodafone Idea Just Reported, And Analysts Assigned A Rs. 6.03 Price Target

One of the biggest stories of last week was how Vodafone Idea Limited shares plunged 35% in the week since its latest quarterly results, closing yesterday at Rs. 3.40. Revenues of Rs. 111b arrived in line with expectations, although statutory losses per share were Rs. 2.24, an impressive 21% smaller than what broker models predicted. This is an important time for investors, as they can track a company’s performance in its report, look at what top analysts are forecasting for next year, and see if there has been any change to expectations for the business. So we collected the latest post-earnings statutory consensus estimates to see what could be in store for next year.

After the latest results, the 22 analysts covering Vodafone Idea are now predicting revenues of Rs. 491.8b in 2021. If met, this would reflect a decent 8.8% improvement in sales compared to the last 12 months. Per-share statutory losses are expected to explode, reaching Rs. 5.14 per share. Before this earnings announcement, analysts had been forecasting revenues of Rs. 488.5b and losses of ₹4.98 per share in 2021. Although the revenue estimates have not really changed, we can see there’s been a earnings per share expectations, suggesting that analysts have become more bullish after the latest result.

With the increase in forecast losses for next year, it’s perhaps no surprise to see that the average analyst price target dipped 5.1% to Rs. 6.03, with analysts signalling that growing losses would be a definite concern. 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 Vodafone Idea, with the most bullish analyst valuing it at Rs. 18.00 and the most bearish at Rs. 1.00 per share. As you can see the range of estimates is wide, with the lowest valuation coming in at less than half the most bullish estimate, suggesting there are some strongly diverging views on how analysts think this business will perform. With this in mind, we wouldn’t assign too much meaning to the consensus price target, as it is just an average and analysts clearly have some deeply divergent views on the business.

Further, we can compare these estimates to past performance, and see how Vodafone Idea forecasts compare to the wider market’s forecast performance. Analysts are definitely expecting Vodafone Idea’s growth to accelerate, with the forecast 8.8% growth ranking favourably alongside historical growth of 3.3% per annum over the past five years. Compare this with other companies in the same market, which are forecast to grow their revenue 3.2% next year. Factoring in the forecast acceleration in revenue, it’s pretty clear that Vodafone Idea is expected to grow much faster than its market.

The Bottom Line

The most obvious conclusion is that analysts made no changes to their forecasts for a loss next year. Fortunately, analysts also reconfirmed their revenue estimates, suggesting sales are tracking in line with expectations – and our data does suggest that Vodafone Idea’s revenues are expected to grow faster than the wider market. Analysts also downgraded their price target, suggesting that the latest news has led analysts to become more pessimistic about the intrinsic value of the business.―Simply Wall