It's been a mediocre week for HUYA Inc. (NYSE:HUYA) shareholders, with the stock dropping 16% to US$3.31 in the week since its latest full-year results. Sales hit CN¥9.2b in line with forecasts, although the company reported a statutory loss per share of CN¥2.02 that was somewhat smaller than the analysts expected. Following the result, the analysts have updated their earnings model, and it would be good to know whether they think there's been a strong change in the company's prospects, or if it's business as usual. We've gathered the most recent statutory forecasts to see whether the analysts have changed their earnings models, following these results.
See our latest analysis for HUYA
Taking into account the latest results, the current consensus, from the 13 analysts covering HUYA, is for revenues of CN¥8.27b in 2023, which would reflect a considerable 10% reduction in HUYA's sales over the past 12 months. Losses are predicted to fall substantially, shrinking 69% to CN¥0.64. Before this latest report, the consensus had been expecting revenues of CN¥8.57b and CN¥0.94 per share in losses. Although the revenue estimates have fallen somewhat, HUYA'sfuture looks a little different to the past, with a very favorable reduction to the loss per share forecasts in particular.
The consensus price target fell 7.0% to US$5.14, with the dip in revenue estimates clearly souring sentiment, despite the forecast reduction in losses. It could also be instructive to look at the range of analyst estimates, to evaluate how different the outlier opinions are from the mean. Currently, the most bullish analyst values HUYA at US$9.86 per share, while the most bearish prices it at US$2.36. With such a narrow range of valuations, the analysts apparently share similar views on what they think the business is worth.
These estimates are interesting, but it can be useful to paint some more broad strokes when seeing how forecasts compare, both to the HUYA's past performance and to peers in the same industry. These estimates imply that sales are expected to slow, with a forecast annualised revenue decline of 10% by the end of 2023. This indicates a significant reduction from annual growth of 23% 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 8.5% annually for the foreseeable future. So although its revenues are forecast to shrink, this cloud does not come with a silver lining - HUYA is expected to lag the wider industry.
The Bottom Line
The most obvious conclusion is that the analysts made no changes to their forecasts for a loss next year. On the negative side, they also downgraded their revenue estimates, and forecasts imply revenues will perform worse than the wider industry. Even so, long term profitability is more important for the value creation process. Furthermore, the analysts also cut their price targets, suggesting that the latest news has led to greater pessimism about the intrinsic value of the business.
With that in mind, we wouldn't be too quick to come to a conclusion on HUYA. Long-term earnings power is much more important than next year's profits. We have forecasts for HUYA going out to 2025, and you can see them free on our platform here.
It is also worth noting that we have found 1 warning sign for HUYA that you need to take into consideration.
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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.