These Analysts Just Made A Neat Downgrade To Their Hydrofarm Holdings Group, Inc. (NASDAQ:HYFM) EPS Forecasts
The analysts covering Hydrofarm Holdings Group, Inc. (NASDAQ:HYFM) 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) estimates were cut sharply as analysts factored in the latest outlook for the business, concluding that they were too optimistic previously.
Following the downgrade, the consensus from three analysts covering Hydrofarm Holdings Group is for revenues of US$236m in 2023, implying an uncomfortable 9.5% decline in sales compared to the last 12 months. Losses are predicted to fall substantially, shrinking 55% to US$0.88 per share. Yet prior to the latest estimates, the analysts had been forecasting revenues of US$280m and losses of US$0.74 per share in 2023. Ergo, there's been a clear change in sentiment, with the analysts administering a notable cut to this year's revenue estimates, while at the same time increasing their loss per share forecasts.
View our latest analysis for Hydrofarm Holdings Group
The consensus price target fell 21% to US$1.18, implicitly signalling that lower earnings per share are a leading indicator for Hydrofarm Holdings Group's valuation.
Taking a look at the bigger picture now, one of the ways we can understand these forecasts is to see how they compare to both past performance and industry growth estimates. Over the past three years, revenues have declined around 0.3% annually. Worse, forecasts are essentially predicting the decline to accelerate, with the estimate for an annualised 18% decline in revenue until the end of 2023. By contrast, our data suggests that other companies (with analyst coverage) in a similar industry are forecast to see their revenue grow 4.1% per year. So it's pretty clear that, while it does have declining revenues, the analysts also expect Hydrofarm Holdings Group to suffer worse than the wider industry.
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 Hydrofarm Holdings Group. Regrettably, they also downgraded their revenue estimates, and the latest forecasts imply the business will grow sales slower than the wider market. Given the scope of the downgrades, it would not be a surprise to see the market become more wary of the business.
Still, the long-term prospects of the business are much more relevant than next year's earnings. At Simply Wall St, we have a full range of analyst estimates for Hydrofarm Holdings Group going out to 2025, 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.
