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Today is shaping up negative for O2Micro International Limited (NASDAQ:OIIM) shareholders, with the analysts delivering a substantial negative revision to this year's forecasts. 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.
After the downgrade, the consensus from O2Micro International's twin analysts is for revenues of US$80m in 2022, which would reflect a definite 16% decline in sales compared to the last year of performance. Following this this downgrade, earnings are now expected to tip over into loss-making territory, with the analysts forecasting losses of US$0.03 per share in 2022. Before this latest update, the analysts had been forecasting revenues of US$96m and earnings per share (EPS) of US$0.24 in 2022. There looks to have been a major change in sentiment regarding O2Micro International's prospects, with a substantial drop in revenues and the analysts now forecasting a loss instead of a profit.
These estimates are interesting, but it can be useful to paint some more broad strokes when seeing how forecasts compare, both to the O2Micro International's past performance and to peers in the same industry. We would highlight that sales are expected to reverse, with a forecast 30% annualised revenue decline to the end of 2022. That is a notable change from historical growth of 13% over the last five years. By contrast, our data suggests that other companies (with analyst coverage) in the same industry are forecast to see their revenue grow 8.4% annually for the foreseeable future. So although its revenues are forecast to shrink, this cloud does not come with a silver lining - O2Micro International is expected to lag the wider industry.
The Bottom Line
The biggest low-light for us was that the forecasts for O2Micro International dropped from profits to a loss this year. Unfortunately analysts also downgraded their revenue estimates, and industry data suggests that O2Micro International's revenues are expected to grow slower than the wider market. We wouldn't be surprised to find shareholders feeling a bit shell-shocked, after these downgrades. It looks like analysts have become a lot more bearish on O2Micro International, and their negativity could be grounds for caution.
Even so, the longer term trajectory of the business is much more important for the value creation of shareholders. We have analyst estimates for O2Micro International going out as far as 2023, 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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