The analyst covering Tarena International, Inc. (NASDAQ:TEDU) delivered a dose of negativity to shareholders today, by making a substantial revision to their statutory forecasts for this year. Revenue and earnings per share (EPS) forecasts were both revised downwards, with the analyst seeing grey clouds on the horizon.

Following the latest downgrade, the solitary analyst covering Tarena International provided consensus estimates of CN¥2.0b revenue in 2023, which would reflect a considerable 9.8% decline on its sales over the past 12 months. After this downgrade, the company is anticipated to report a loss of CN¥0.67 in 2023, a sharp decline from a profit over the last year. Before this latest update, the analyst had been forecasting revenues of CN¥2.3b and earnings per share (EPS) of CN¥7.98 in 2023. There looks to have been a major change in sentiment regarding Tarena International's prospects, with a substantial drop in revenues and the analyst now forecasting a loss instead of a profit.

See our latest analysis for Tarena International

The consensus price target fell 24% to CN¥57.24, implicitly signalling that lower earnings per share are a leading indicator for Tarena International's valuation.

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. We would highlight that sales are expected to reverse, with a forecast 13% annualised revenue decline to the end of 2023. That is a notable change from historical growth of 4.2% 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 9.6% annually for the foreseeable future. So although its revenues are forecast to shrink, this cloud does not come with a silver lining - Tarena International is expected to lag the wider industry.

The Bottom Line

The biggest low-light for us was that the forecasts for Tarena International dropped from profits to a loss this year. Unfortunately the analyst also downgraded their revenue estimates, and industry data suggests that Tarena International's revenues are expected to grow slower than the wider market. After such a stark change in sentiment from the analyst, we'd understand if readers now felt a bit wary of Tarena International.

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 2024, which can be seen for free on our platform here.