The Reject Shop Ltd (ASX: TJS) share price is around $2.05 this afternoon but there could be some falls ahead if the analysts at Goldman Sachs are correct in their view of the stock.
Back on May 23, The Reject Shop shocked investors with a trading update that downgraded its full year profit expectations from a $3.1 million to $4.1 million profit to a $1 million to $2 million loss.
At the same time it also reported that same-store sales for the financial year to date were down 2.7% and down 2.9% for the second half of the financial year. The group predictably blamed the result on the soft local economy, wages growth, and falling house prices.
Since that trading update the stock has dropped around 10% as investors were not expecting much from this discounted retailer anyway, but Goldman’s believes there may be more problems ahead.
In fact after the update it lowered its FY 2019 through to FY 2021 earnings forecasts a staggering 149%, 44% and 42%, which goes to show how analysts’ forecasts should not be relied upon as gospel in making investing decisions.
As a result of its big earnings forecasts downgrades, Goldmans has lowered its 12-month price target on Reject Shop shares to just $1.55.
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Motley Fool contributor Tom Richardson has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.