Shareholders in RLX Technology Inc. (NYSE:RLX) had a terrible week, as shares crashed 49% to US$1.22 in the week since its latest full-year results. Revenues disappointed slightly, as sales of CN¥8.5b were 2.5% below what the analysts had predicted. Profits were a relative bright spot, with statutory per-share earnings of CN¥1.44 coming in 13% above what was anticipated. This is an important time for investors, as they can track a company's performance in its report, look at what experts are forecasting for next year, and see if there has been any change to expectations for the business. So we collected the latest post-earnings statutory consensus estimates to see what could be in store for next year.
Following the latest results, RLX Technology's four analysts are now forecasting revenues of CN¥10.6b in 2022. This would be a major 25% improvement in sales compared to the last 12 months. Statutory earnings per share are forecast to plummet 28% to CN¥1.09 in the same period. Yet prior to the latest earnings, the analysts had been anticipated revenues of CN¥11.4b and earnings per share (EPS) of CN¥1.12 in 2022. It's pretty clear that pessimism has reared its head after the latest results, leading to a weaker revenue outlook and a small dip in earnings per share estimates.
It'll come as no surprise then, to learn that the analysts have cut their price target 21% to US$11.25. There's another way to think about price targets though, and that's to look at the range of price targets put forward by analysts, because a wide range of estimates could suggest a diverse view on possible outcomes for the business. Currently, the most bullish analyst values RLX Technology at US$25.00 per share, while the most bearish prices it at US$4.12. This shows there is still a bit of diversity in estimates, but analysts don't appear to be totally split on the stock as though it might be a success or failure situation.
These estimates are interesting, but it can be useful to paint some more broad strokes when seeing how forecasts compare, both to the RLX Technology's past performance and to peers in the same industry. It's pretty clear that there is an expectation that RLX Technology's revenue growth will slow down substantially, with revenues to the end of 2022 expected to display 25% growth on an annualised basis. This is compared to a historical growth rate of 64% over the past three years. Juxtapose this against the other companies in the industry with analyst coverage, which are forecast to grow their revenues (in aggregate) 4.0% per year. So it's pretty clear that, while RLX Technology's revenue growth is expected to slow, it's still expected to grow faster than the industry itself.
The Bottom Line
The most important thing to take away is that the analysts downgraded their earnings per share estimates, showing that there has been a clear decline in sentiment following these results. They also downgraded their revenue estimates, although industry data suggests that RLX Technology's revenues are expected to grow faster than the wider industry. The consensus price target fell measurably, with the analysts seemingly not reassured by the latest results, leading to a lower estimate of RLX Technology's future valuation.
With that in mind, we wouldn't be too quick to come to a conclusion on RLX Technology. Long-term earnings power is much more important than next year's profits. At Simply Wall St, we have a full range of analyst estimates for RLX Technology going out to 2024, and you can see them free on our platform here..
That said, it's still necessary to consider the ever-present spectre of investment risk. We've identified 1 warning sign with RLX Technology , and understanding it should be part of your investment process.
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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.