Desktop Metal, Inc. (NYSE:DM) Analysts Just Trimmed Their Revenue Forecasts By 28%
The analysts covering Desktop Metal, Inc. (NYSE:DM) delivered a dose of negativity to shareholders today, by making a substantial revision to their statutory forecasts for next year. Revenue estimates were cut sharply as analysts signalled a weaker outlook - perhaps a sign that investors should temper their expectations as well.
Following the downgrade, the most recent consensus for Desktop Metal from its four analysts is for revenues of US$238m in 2023 which, if met, would be a solid 16% increase on its sales over the past 12 months. Losses are predicted to fall substantially, shrinking 78% to US$0.35. However, before this estimates update, the consensus had been expecting revenues of US$332m and US$0.34 per share in losses. So there's definitely been a change in sentiment in this update, with the analysts administering a substantial haircut to next year's revenue estimates, while at the same time holding losses per share steady.
See our latest analysis for Desktop Metal
The consensus price target fell 15% to US$3.21, with the analysts clearly concerned about the weaker revenue outlook and expectation of ongoing losses. The consensus price target is just an average of individual analyst targets, so - it could be handy to see how wide the range of underlying estimates is. Currently, the most bullish analyst values Desktop Metal at US$5.00 per share, while the most bearish prices it at US$1.75. 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.
Of course, another way to look at these forecasts is to place them into context against the industry itself. 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 13% growth on an annualised basis. This is compared to a historical growth rate of 95% 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 5.2% annually. Even after the forecast slowdown in growth, it seems obvious that Desktop Metal is also expected to grow faster than the wider industry.
The Bottom Line
Unfortunately, analysts also downgraded their revenue estimates, although our data indicates revenues are expected to perform better than the wider market. The consensus price target fell measurably, with analysts seemingly not reassured by recent business developments, leading to a lower estimate of Desktop Metal's future valuation. Overall, given the drastic downgrade to next year's forecasts, we'd be feeling a little more wary of Desktop Metal going forwards.
With that said, the long-term trajectory of the company's earnings is a lot more important than next year. At Simply Wall St, we have a full range of analyst estimates for Desktop Metal 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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