The analysts covering Calix Limited (ASX:CXL) delivered a dose of negativity to shareholders today, by making a substantial revision to their statutory forecasts for this year. Both revenue and earnings per share (EPS) forecasts went under the knife, suggesting analysts have soured majorly on the business.
Following the downgrade, the latest consensus from Calix's dual analysts is for revenues of AU$23m in 2023, which would reflect a major 26% improvement in sales compared to the last 12 months. Losses are predicted to fall substantially, shrinking 33% to AU$0.068. Yet prior to the latest estimates, the analysts had been forecasting revenues of AU$27m and losses of AU$0.061 per share in 2023. So there's been quite a change-up of views after the recent consensus updates, with the analysts making a serious cut to their revenue forecasts while also expecting losses per share to increase.
The consensus price target was broadly unchanged at AU$9.25, perhaps implicitly signalling that the weaker earnings outlook is not expected to have a long-term impact on the valuation. 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. Currently, the most bullish analyst values Calix at AU$10.00 per share, while the most bearish prices it at AU$8.50. With such a narrow range of valuations, analysts apparently share similar views on what they think the business is worth.
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 Calix's revenue growth will slow down substantially, with revenues to the end of 2023 expected to display 26% growth on an annualised basis. This is compared to a historical growth rate of 41% 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 6.7% annually. So it's pretty clear that, while Calix's revenue growth is expected to slow, it's still expected to grow faster than the industry itself.
The Bottom Line
The most important thing to note from this downgrade is that the consensus increased its forecast losses this year, suggesting all may not be well at Calix. While analysts did downgrade their revenue estimates, these forecasts still imply revenues will perform better than the wider market. We're also surprised to see that the price target went unchanged. Still, deteriorating business conditions (assuming accurate forecasts!) can be a leading indicator for the stock price, so we wouldn't blame investors for being more cautious on Calix after the downgrade.
With that said, the long-term trajectory of the company's earnings is a lot more important than next year. At least one analyst has provided forecasts out to 2025, which can be seen 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.
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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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