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Market forces rained on the parade of Xcel Brands, Inc. (NASDAQ:XELB) shareholders today, when the analysts downgraded their forecasts for this year. This report focused on revenue estimates, and it looks as though the consensus view of the business has become substantially more conservative. At US$0.70, shares are up 9.0% in the past 7 days. We'd be curious to see if the downgrade is enough to reverse investor sentiment on the business.
Following the latest downgrade, Xcel Brands' dual analysts currently expect revenues in 2024 to be US$9.9m, approximately in line with the last 12 months. The loss per share is anticipated to greatly reduce in the near future, narrowing 43% to US$0.43. However, before this estimates update, the consensus had been expecting revenues of US$12m and US$0.43 per share in losses. So there's definitely been a change in sentiment in this update, with the analysts administering a substantial haircut to this year's revenue estimates, while at the same time holding losses per share steady.
View our latest analysis for Xcel Brands
The consensus price target fell 9.1% to US$2.50, with the analysts clearly concerned about the weaker revenue outlook and expectation of ongoing losses.
One way to get more context on these forecasts is to look at how they compare to both past performance, and how other companies in the same industry are performing. One thing that stands out from these estimates is that shrinking revenues are expected to moderate over the period ending 2024 compared to the historical decline of 17% per annum over the past five years. By contrast, our data suggests that other companies (with analyst coverage) in a similar industry are forecast to see their revenue grow 4.8% per year. So it's pretty clear that, while it does have declining revenues, the analysts also expect Xcel Brands to suffer worse than the wider industry.
The Bottom Line
Regrettably, they also downgraded their revenue estimates, and the latest forecasts imply the business will grow sales slower than the wider market. Furthermore, there was a cut to the price target, suggesting that the latest news has led to more pessimism about the intrinsic value of the business. 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 Xcel Brands after today.
With that said, the long-term trajectory of the company's earnings is a lot more important than next year. At least one analyst has provided forecasts out to 2025, which can be seen for free on our platform here.