The analysts covering AXT, Inc. (NASDAQ:AXTI) delivered a dose of negativity to shareholders today, by making a substantial revision to their statutory forecasts for this year. Revenue estimates were cut sharply as the analysts signalled a weaker outlook - perhaps a sign that investors should temper their expectations as well.
After the downgrade, the consensus from AXT's five analysts is for revenues of US$86m in 2023, which would reflect a sizeable 29% decline in sales compared to the last year of performance. Before the latest update, the analysts were foreseeing US$98m of revenue in 2023. The consensus view seems to have become more pessimistic on AXT, noting the measurable cut to revenue estimates in this update.
The consensus price target fell 27% to US$5.49, with the analysts clearly less optimistic about AXT's valuation following this update. There's another way to think about price targets though, and that's to look at the range of price targets put forward by analysts, because a wide range of estimates could suggest a diverse view on possible outcomes for the business. There are some variant perceptions on AXT, with the most bullish analyst valuing it at US$10.00 and the most bearish at US$3.70 per share. So we wouldn't be assigning too much credibility to analyst price targets in this case, because there are clearly some widely differing views on what kind of performance this business can generate. As a result it might not be possible to derive much meaning from the consensus price target, which is after all just an average of this wide range of estimates.
Another way we can view these estimates is in the context of the bigger picture, such as how the forecasts stack up against past performance, and whether forecasts are more or less bullish relative to other companies in the industry. We would highlight that sales are expected to reverse, with a forecast 37% annualised revenue decline to the end of 2023. That is a notable change from historical growth of 9.5% 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 11% annually for the foreseeable future. It's pretty clear that AXT's revenues are expected to perform substantially worse than the wider industry.
The Bottom Line
The most important thing to take away is that analysts cut their revenue estimates for this year. They're also anticipating slower revenue growth than the wider market. The consensus price target fell measurably, with analysts seemingly not reassured by recent business developments, leading to a lower estimate of AXT's future valuation. Overall, given the drastic downgrade to this year's forecasts, we'd be feeling a little more wary of AXT going forwards.
Hungry for more information? At least one of AXT's five analysts has provided estimates out to 2025, which can be seen for free on our platform here.
Of course, seeing company management invest large sums of money in a stock can be just as useful as knowing whether analysts are downgrading their estimates. So you may also wish to search this free list of stocks that insiders are buying.
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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.
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