Today is shaping up negative for NetDragon Websoft Holdings Limited (HKG:777) shareholders, with the analysts delivering a substantial negative revision to this year's forecasts. This report focused on revenue estimates, and it looks as though the consensus view of the business has become substantially more conservative.
Following the latest downgrade, the three analysts covering NetDragon Websoft Holdings provided consensus estimates of CN¥5.3b revenue in 2025, which would reflect a not inconsiderable 12% decline on its sales over the past 12 months. Per-share earnings are expected to increase 2.5% to CN¥0.60. Prior to this update, the analysts had been forecasting revenues of CN¥7.0b and earnings per share (EPS) of CN¥1.93 in 2025. 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.
View our latest analysis for NetDragon Websoft Holdings
Analysts made no major changes to their price target of CN¥14.01, suggesting the downgrades are not expected to have a long-term impact on NetDragon Websoft Holdings' valuation. 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. There are some variant perceptions on NetDragon Websoft Holdings, with the most bullish analyst valuing it at CN¥14.95 and the most bearish at CN¥13.40 per share. The narrow spread of estimates could suggest that the business' future is relatively easy to value, or that the analysts have a clear view on its prospects.
Taking a look at the bigger picture now, one of the ways we can understand these forecasts is to see how they compare to both past performance and industry growth estimates. These estimates imply that sales are expected to slow, with a forecast annualised revenue decline of 12% by the end of 2025. This indicates a significant reduction from annual growth of 2.7% over the last five years. By contrast, our data suggests that other companies (with analyst coverage) in the same industry are forecast to see their revenue grow 8.8% annually for the foreseeable future. It's pretty clear that NetDragon Websoft Holdings' revenues are expected to perform substantially worse than the wider industry.
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 NetDragon Websoft Holdings. Regrettably, they also downgraded their revenue estimates, and the latest forecasts imply the business will grow sales slower 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 NetDragon Websoft Holdings after today.
Even so, the longer term trajectory of the business is much more important for the value creation of shareholders. At Simply Wall St, we have a full range of analyst estimates for NetDragon Websoft Holdings going out to 2027, and you can see them free on our platform here.
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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. 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.