Analysts Have Just Cut Their DarioHealth Corp. (NASDAQ:DRIO) Revenue Estimates By 20%
Today is shaping up negative for DarioHealth Corp. (NASDAQ:DRIO) shareholders, with the analysts delivering a substantial negative revision to this year's forecasts. There was a fairly draconian cut to their revenue estimates, perhaps an implicit admission that previous forecasts were much too optimistic.
After this downgrade, DarioHealth's eight analysts are now forecasting revenues of US$28m in 2022. This would be a solid 11% improvement in sales compared to the last 12 months. Losses are expected to be contained, narrowing 11% from last year to US$3.12. Yet before this consensus update, the analysts had been forecasting revenues of US$34m and losses of US$3.10 per share in 2022. 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 DarioHealth
the analysts have cut their price target 9.5% to US$16.59 per share, signalling that the declining revenue and ongoing losses are contributing to the lower valuation. It could also be instructive to look at the range of analyst estimates, to evaluate how different the outlier opinions are from the mean. Currently, the most bullish analyst values DarioHealth at US$31.00 per share, while the most bearish prices it at US$8.75. As you can see the range of estimates is wide, with the lowest valuation coming in at less than half the most bullish estimate, suggesting there are some strongly diverging views on how think this business will perform. 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. It's pretty clear that there is an expectation that DarioHealth's revenue growth will slow down substantially, with revenues to the end of 2022 expected to display 23% growth on an annualised basis. This is compared to a historical growth rate of 31% over the past five years. By way of comparison, the other companies in this industry with analyst coverage are forecast to grow their revenue at 7.9% annually. Even after the forecast slowdown in growth, it seems obvious that DarioHealth is also expected to grow faster than the wider industry.
The Bottom Line
Unfortunately, analysts also downgraded their revenue estimates, although our data indicates revenues are expected to perform better than the wider market. Furthermore, there was a cut to the price target, suggesting that the latest news has led to more pessimism about the intrinsic value of the business. 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 DarioHealth after today.
Even so, the longer term trajectory of the business is much more important for the value creation of shareholders. We have estimates - from multiple DarioHealth analysts - going out to 2024, and you can see them 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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