Analysts Have Lowered Expectations For Desktop Metal, Inc. (NYSE:DM) After Its Latest Results
The analysts might have been a bit too bullish on Desktop Metal, Inc. (NYSE:DM), given that the company fell short of expectations when it released its first-quarter results last week. It definitely looks like a negative result overall with revenues falling 15% short of analyst estimates at US$41m. Statutory losses were US$0.16 per share, 40% bigger than what the analysts expected. This is an important time for investors, as they can track a company's performance in its report, look at what experts are forecasting for next year, and see if there has been any change to expectations for the business. We've gathered the most recent statutory forecasts to see whether the analysts have changed their earnings models, following these results.
View our latest analysis for Desktop Metal
After the latest results, the five analysts covering Desktop Metal are now predicting revenues of US$218.3m in 2023. If met, this would reflect an okay 5.7% improvement in sales compared to the last 12 months. The loss per share is expected to greatly reduce in the near future, narrowing 83% to US$0.37. Yet prior to the latest earnings, the analysts had been forecasting revenues of US$235.0m and losses of US$0.32 per share in 2023. So it's pretty clear the analysts have mixed opinions on Desktop Metal after this update; revenues were downgraded and per-share losses expected to increase.
The average price target was broadly unchanged at US$2.50, perhaps implicitly signalling that the weaker earnings outlook is not expected to have a long-term impact on the 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. The most optimistic Desktop Metal analyst has a price target of US$5.00 per share, while the most pessimistic values it at US$1.60. We would probably assign less value to the analyst forecasts in this situation, because such a wide range of estimates could imply that the future of this business is difficult to value accurately. With this in mind, we wouldn't rely too heavily the consensus price target, as it is just an average and analysts clearly have some deeply divergent views on the business.
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. It's pretty clear that there is an expectation that Desktop Metal's revenue growth will slow down substantially, with revenues to the end of 2023 expected to display 7.6% growth on an annualised basis. This is compared to a historical growth rate of 82% over the past three years. By way of comparison, the other companies in this industry with analyst coverage are forecast to grow their revenue at 4.9% annually. So it's pretty clear that, while Desktop Metal'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 is the forecast of increased losses next year, suggesting all may not be well at Desktop Metal. Regrettably, they also downgraded their revenue estimates, but the latest forecasts still imply the business will grow faster than the wider industry. There was no real change to the consensus price target, suggesting that the intrinsic value of the business has not undergone any major changes with the latest estimates.
Following on from that line of thought, we think that 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 Desktop Metal going out to 2025, and you can see them free on our platform here..
We don't want to rain on the parade too much, but we did also find 5 warning signs for Desktop Metal that you need to be mindful of.
Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.
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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