Analysts Just Slashed Their AutoWeb, Inc. (NASDAQ:AUTO) EPS Numbers
The latest analyst coverage could presage a bad day for AutoWeb, Inc. (NASDAQ:AUTO), with the analysts making across-the-board cuts to their statutory estimates that might leave shareholders a little shell-shocked. Revenue and earnings per share (EPS) forecasts were both revised downwards, with the analysts seeing grey clouds on the horizon. Shares are up 8.2% to US$1.05 in the past week. It will be interesting to see if this downgrade motivates investors to start selling their holdings.
Following the latest downgrade, the current consensus, from the four analysts covering AutoWeb, is for revenues of US$99m in 2020, which would reflect a not inconsiderable 13% reduction in AutoWeb's sales over the past 12 months. The loss per share is anticipated to greatly reduce in the near future, narrowing 20% to US$0.93. Yet prior to the latest estimates, the analysts had been forecasting revenues of US$127m and losses of US$0.39 per share in 2020. 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.
See our latest analysis for AutoWeb
The consensus price target fell 52% to US$1.88, implicitly signalling that lower earnings per share are a leading indicator for AutoWeb's valuation. That's not the only conclusion we can draw from this data however, as some investors also like to consider the spread in estimates when evaluating analyst price targets. There are some variant perceptions on AutoWeb, with the most bullish analyst valuing it at US$2.50 and the most bearish at US$1.15 per share. This is a fairly broad spread of estimates, suggesting that the analysts are forecasting a wide range of possible outcomes for the business.
Of course, another way to look at these forecasts is to place them into context against the industry itself. These estimates imply that sales are expected to slow, with a forecast revenue decline of 13%, a significant reduction from annual growth of 0.1% over the last five years. Compare this with our data, which suggests that other companies in the same industry are, in aggregate, expected to see their revenue grow 13% next year. It's pretty clear that AutoWeb's revenues are expected to perform substantially 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 AutoWeb. Unfortunately analysts also downgraded their revenue estimates, and industry data suggests that AutoWeb's revenues are expected to grow slower than the wider market. After such a stark change in sentiment from analysts, we'd understand if readers now felt a bit wary of AutoWeb.
There might be good reason for analyst bearishness towards AutoWeb, like a short cash runway. Learn more, and discover the 4 other risks we've identified, for 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.
If you spot an error that warrants correction, please contact the editor at editorial-team@simplywallst.com. 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. Simply Wall St has no position in the stocks mentioned.
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