Some Analysts Just Cut Their Cango Inc. (NYSE:CANG) Estimates
Market forces rained on the parade of Cango Inc. (NYSE:CANG) 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.
After the downgrade, the two analysts covering Cango are now predicting revenues of CN¥4.5b in 2022. If met, this would reflect a solid 14% improvement in sales compared to the last 12 months. Before the latest update, the analysts were foreseeing CN¥5.0b of revenue in 2022. The consensus view seems to have become more pessimistic on Cango, noting the substantial drop in revenue estimates in this update.
See our latest analysis for Cango
The consensus price target fell 23% to CN¥30.06, with the analysts clearly less optimistic about Cango's valuation following this update. Fixating on a single price target can be unwise though, since the consensus target is effectively the average of analyst price targets. As a result, some investors like to look at the range of estimates to see if there are any diverging opinions on the company's valuation. There are some variant perceptions on Cango, with the most bullish analyst valuing it at CN¥6.46 and the most bearish at CN¥2.99 per share. Even so, with a relatively close grouping of estimates, it looks like the analysts are quite confident in their valuations, suggesting Cango is an easy business to forecast or the underlying assumptions are obvious.
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 Cango's revenue growth is expected to slow, with the forecast 14% annualised growth rate until the end of 2022 being well below the historical 36% p.a. growth over the last five years. Compare this to the 117 other companies in this industry with analyst coverage, which are forecast to grow their revenue at 14% per year. So it's pretty clear that, while Cango's revenue growth is expected to slow, it's expected to grow roughly in line with the industry.
The Bottom Line
The clear low-light was that analysts slashing their revenue forecasts for Cango this year. Analysts also expect revenues to grow approximately in line with the wider market. The consensus price target fell measurably, with analysts seemingly not reassured by recent business developments, leading to a lower estimate of Cango's future valuation. Overall, given the drastic downgrade to this year's forecasts, we'd be feeling a little more wary of Cango going forwards.
Looking to learn more? At least one of Cango's two analysts has provided estimates out to 2024, 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.
