Things Look Grim For MP Materials Corp. (NYSE:MP) After Today's Downgrade
Today is shaping up negative for MP Materials Corp. (NYSE:MP) shareholders, with the analysts delivering a substantial negative revision to this year's forecasts. Both revenue and earnings per share (EPS) forecasts went under the knife, suggesting analysts have soured majorly on the business. Shares are up 9.7% to US$22.58 in the past week. We'd be curious to see if the downgrade is enough to reverse investor sentiment on the business.
Following the latest downgrade, the ten analysts covering MP Materials provided consensus estimates of US$328m revenue in 2023, which would reflect a stressful 28% decline on its sales over the past 12 months. Statutory earnings per share are anticipated to nosedive 75% to US$0.35 in the same period. Prior to this update, the analysts had been forecasting revenues of US$443m and earnings per share (EPS) of US$0.95 in 2023. It looks like analyst sentiment has declined substantially, with a sizeable cut to revenue estimates and a pretty serious decline to earnings per share numbers as well.
View our latest analysis for MP Materials
It'll come as no surprise then, to learn that the analysts have cut their price target 5.6% to US$37.00. 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 MP Materials at US$56.00 per share, while the most bearish prices it at US$26.00. Note the wide gap in analyst price targets? This implies to us that there is a fairly broad range of possible scenarios for the underlying business.
One way to get more context on these forecasts is to look at how they compare to both past performance, and how other companies in the same industry are performing. These estimates imply that sales are expected to slow, with a forecast annualised revenue decline of 36% by the end of 2023. This indicates a significant reduction from annual growth of 58% over the last three years. By contrast, our data suggests that other companies (with analyst coverage) in the same industry are forecast to see their revenue grow 1.6% annually for the foreseeable future. So although its revenues are forecast to shrink, this cloud does not come with a silver lining - MP Materials is expected to lag the wider industry.
The Bottom Line
The biggest issue in the new estimates is that analysts have reduced their earnings per share estimates, suggesting business headwinds lay ahead for MP Materials. Regrettably, they also downgraded their revenue estimates, and the latest forecasts imply the business will grow sales slower than the wider market. Given the scope of the downgrades, it would not be a surprise to see the market become more wary of the business.
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 MP Materials going out to 2025, 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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