The latest analyst coverage could presage a bad day for FTC Solar, Inc. (NASDAQ:FTCI), with the analysts making across-the-board cuts to their statutory estimates that might leave shareholders a little shell-shocked. Both revenue and earnings per share (EPS) estimates were cut sharply as the analysts factored in the latest outlook for the business, concluding that they were too optimistic previously. Surprisingly the share price has been buoyant, rising 36% to US$2.58 in the past 7 days. It will be interesting to see if the downgrade has an impact on buying demand for the company's shares.
Following the downgrade, the most recent consensus for FTC Solar from its eight analysts is for revenues of US$396m in 2023 which, if met, would be a major 100% increase on its sales over the past 12 months. Losses are predicted to fall substantially, shrinking 88% to US$0.12. Before this latest update, the analysts had been forecasting revenues of US$537m and earnings per share (EPS) of US$0.17 in 2023. So we can see that the consensus has become notably more bearish on FTC Solar's outlook with these numbers, making a sizeable cut to next year's revenue estimates. Furthermore, they expect the business to be loss-making next year, compared to their previous forecasts of a profit.
The consensus price target fell 25% to US$4.81, implicitly signalling that lower earnings per share are a leading indicator for FTC Solar's valuation. It could also be instructive to look at the range of analyst estimates, to evaluate how different the outlier opinions are from the mean. Currently, the most bullish analyst values FTC Solar at US$9.00 per share, while the most bearish prices it at US$2.00. So we wouldn't be assigning too much credibility to analyst price targets in this case, because there are clearly some widely differing views on what kind of performance this business can generate. With this in mind, we wouldn't rely too heavily on the consensus price target, as it is just an average and analysts clearly have some deeply divergent views on the business.
Looking at the bigger picture now, one of the ways we can make sense of these forecasts is to see how they measure up against both past performance and industry growth estimates. The analysts are definitely expecting FTC Solar's growth to accelerate, with the forecast 74% annualised growth to the end of 2023 ranking favourably alongside historical growth of 28% per annum over the past three years. Compare this with other companies in the same industry, which are forecast to grow their revenue 9.7% annually. It seems obvious that, while the growth outlook is brighter than the recent past, the analysts also expect FTC Solar to grow faster than the wider industry.
The Bottom Line
The most important thing to take away is that analysts are expecting FTC Solar to become unprofitable next year. Unfortunately, analysts also downgraded their revenue estimates, although our data indicates revenues are expected to perform better than the wider market. With a serious cut to next year's expectations and a falling price target, we wouldn't be surprised if investors were becoming wary of FTC Solar.
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 FTC Solar going out to 2024, 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.
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