HEXO Corp. (TSE:HEXO) Analysts Are More Bearish Than They Used To Be
One thing we could say about the analysts on HEXO Corp. (TSE:HEXO) - they aren't optimistic, having just made a major negative revision to their near-term (statutory) forecasts for the organization. Both revenue and earnings per share (EPS) forecasts went under the knife, suggesting the analysts have soured majorly on the business.
Following the downgrade, the current consensus from HEXO's eleven analysts is for revenues of CA$217m in 2022 which - if met - would reflect a sizeable 93% increase on its sales over the past 12 months. Losses are predicted to fall substantially, shrinking 94% to CA$0.12. Yet before this consensus update, the analysts had been forecasting revenues of CA$260m and losses of CA$0.043 per share in 2022. Ergo, there's been a clear change in sentiment, with the analysts administering a notable cut to next year's revenue estimates, while at the same time increasing their loss per share forecasts.
See our latest analysis for HEXO
The consensus price target fell 13% to CA$8.75, implicitly signalling that lower earnings per share are a leading indicator for HEXO'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. The most optimistic HEXO analyst has a price target of CA$12.00 per share, while the most pessimistic values it at CA$5.97. This is a fairly broad spread of estimates, suggesting that the analysts are forecasting a wide range of possible outcomes for the business.
Another way we can view these estimates is in the context of the bigger picture, such as how the forecasts stack up against past performance, and whether forecasts are more or less bullish relative to other companies in the industry. We can infer from the latest estimates that forecasts expect a continuation of HEXO'shistorical trends, as the 69% annualised revenue growth to the end of 2022 is roughly in line with the 67% annual revenue growth over the past five years. Compare this with the broader industry, which analyst estimates (in aggregate) suggest will see revenues grow 33% annually. So although HEXO is expected to maintain its revenue growth rate, it's definitely expected to grow faster than the wider industry.
The Bottom Line
The most important thing to note from this downgrade is that the consensus increased its forecast losses next year, suggesting all may not be well at HEXO. Unfortunately, analysts also downgraded their revenue estimates, although our data indicates revenues are expected to perform better than the wider market. After such a stark change in sentiment from analysts, we'd understand if readers now felt a bit wary of HEXO.
There might be good reason for analyst bearishness towards HEXO, like dilutive stock issuance over the past year. For more information, you can click here to discover this and the 2 other warning signs we've identified.
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.
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. 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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