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Analysts Have Just Cut Their Capstone Turbine Corporation (NASDAQ:CPST) Revenue Estimates By 14%

Simply Wall St
·3 mins read

The latest analyst coverage could presage a bad day for Capstone Turbine Corporation (NASDAQ:CPST), with the analysts making across-the-board cuts to their statutory estimates that might leave shareholders a little shell-shocked. There was a fairly draconian cut to their revenue estimates, perhaps an implicit admission that previous forecasts were much too optimistic. Surprisingly the share price has been buoyant, rising 48% to US$3.45 in the past 7 days. It will be interesting to see if the downgrade has an impact on buying demand for the company's shares.

Following the downgrade, the consensus from three analysts covering Capstone Turbine is for revenues of US$62m in 2021, implying a considerable 10% decline in sales compared to the last 12 months. Losses are predicted to fall substantially, shrinking 66% to US$0.91. However, before this estimates update, the consensus had been expecting revenues of US$72m and US$0.90 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.

See our latest analysis for Capstone Turbine

NasdaqCM:CPST Earnings and Revenue Growth July 2nd 2020
NasdaqCM:CPST Earnings and Revenue Growth July 2nd 2020

Looking at the bigger picture now, one of the ways we can make sense of these forecasts is to see how they measure up against both past performance and industry growth estimates. One more thing stood out to us about these estimates, and it's the idea that Capstone Turbine'sdecline is expected to accelerate, with revenues forecast to fall 10% next year, topping off a historical decline of 6.1% a year over the past five years. Compare this against analyst estimates for companies in the wider industry, which suggest that revenues (in aggregate) are expected to grow 5.1% next year. So it's pretty clear that, while it does have declining revenues, the analysts also expect Capstone Turbine 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. 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 Capstone Turbine after today.

After a downgrade like this, it's pretty clear that previous forecasts were too optimistic. What's more, we've spotted several possible issues with Capstone Turbine's business, like major dilution from new stock issuance in the past year. Learn more, and discover the 4 other flags we've identified, for free on our platform here.

Another way to search for interesting companies that could be reaching an inflection point is to track whether management are buying or selling, with our free list of growing companies that insiders are buying.

This article by Simply Wall St is general in nature. 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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