The latest analyst coverage could presage a bad day for HTG Molecular Diagnostics, Inc. (NASDAQ:HTGM), with the analysts making across-the-board cuts to their statutory estimates that might leave shareholders a little shell-shocked. 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 latest consensus from HTG Molecular Diagnostics' four analysts is for revenues of US$15m in 2021, which would reflect a credible 6.1% improvement in sales compared to the last 12 months. Losses are predicted to fall substantially, shrinking 34% to US$0.24. However, before this estimates update, the consensus had been expecting revenues of US$20m and US$0.23 per share in losses. So there's been quite a change-up of views after the recent consensus updates, with the analysts making a serious cut to their revenue forecasts while also expecting losses per share to increase.
The consensus price target fell 25% to US$0.97, with the analysts clearly concerned about the company following the weaker revenue and earnings outlook. 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 HTG Molecular Diagnostics at US$1.50 per share, while the most bearish prices it at US$0.40. We would probably assign less value to the forecasts in this situation, because such a wide range of estimates could imply that the future of this business is difficult to value accurately. As a result it might not be possible to derive much meaning from the consensus price target, which is after all just an average of this wide range of estimates.
These estimates are interesting, but it can be useful to paint some more broad strokes when seeing how forecasts compare, both to the HTG Molecular Diagnostics' past performance and to peers in the same industry. We would highlight that HTG Molecular Diagnostics' revenue growth is expected to slow, with forecast 6.1% increase next year well below the historical 34% p.a. growth over the last five years. Compare this against other companies (with analyst forecasts) in the industry, which are in aggregate expected to see revenue growth of 21% next year. Factoring in the forecast slowdown in growth, it seems obvious that HTG Molecular Diagnostics is also expected to grow slower than other industry participants.
The Bottom Line
The most important thing to take away is that analysts increased their loss per share estimates for next year. Regrettably, they also downgraded their revenue estimates, and the latest forecasts imply the business will grow sales slower 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 HTG Molecular Diagnostics' future valuation. Often, one downgrade can set off a daisy-chain of cuts, especially if an industry is in decline. So we wouldn't be surprised if the market became a lot more cautious on HTG Molecular Diagnostics after today.
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 HTG Molecular Diagnostics 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.
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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