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Today is shaping up negative for IronNet, Inc. (NYSE:IRNT) shareholders, with the analysts delivering a substantial negative revision to next year's forecasts. Revenue and earnings per share (EPS) forecasts were both revised downwards, with analysts seeing grey clouds on the horizon.
After the downgrade, the four analysts covering IronNet are now predicting revenues of US$42m in 2023. If met, this would reflect a substantial 56% improvement in sales compared to the last 12 months. Losses are supposed to balloon 24% to US$0.84 per share. However, before this estimates update, the consensus had been expecting revenues of US$101m and US$0.74 per share in losses. 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 fell 68% to US$6.00, implicitly signalling that lower earnings per share are a leading indicator for IronNet's valuation. 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. Currently, the most bullish analyst values IronNet at US$29.00 per share, while the most bearish prices it at US$10.00. 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.
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. The analysts are definitely expecting IronNet's growth to accelerate, with the forecast 43% annualised growth to the end of 2023 ranking favourably alongside historical growth of 2.6% per annum over the past year. Compare this with other companies in the same industry, which are forecast to grow their revenue 15% annually. Factoring in the forecast acceleration in revenue, it's pretty clear that IronNet is expected to grow much faster than its industry.
The Bottom Line
The most important thing to take away is that analysts increased their loss per share estimates for next year. Unfortunately, analysts also downgraded their revenue estimates, although our data indicates revenues are expected to perform better than the wider market. After such a stark change in sentiment from analysts, we'd understand if readers now felt a bit wary of IronNet.
So things certainly aren't looking great, and you should also know that we've spotted some potential warning signs with IronNet, including a short cash runway. For more information, you can click here to discover this and the 2 other flags we've identified.
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.