Market forces rained on the parade of BE Semiconductor Industries N.V. (AMS:BESI) shareholders today, when the analysts downgraded their forecasts for this year. Both revenue and earnings per share (EPS) forecasts went under the knife, suggesting the analysts have soured majorly on the business. Bidders are definitely seeing a different story, with the stock price of €26.28 reflecting a 15% rise in the past week. Whether the downgrade will have a negative impact on demand for shares is yet to be seen.
Following the latest downgrade, BE Semiconductor Industries’s six analysts currently expect revenues in 2020 to be €358m, approximately in line with the last 12 months. Statutory earnings per share are forecast to be €1.10, approximately in line with the last 12 months. Prior to this update, the analysts had been forecasting revenues of €437m and earnings per share (EPS) of €1.31 in 2020. It looks like analyst sentiment has declined substantially, with a substantial drop in revenue estimates and a real cut to earnings per share numbers as well.
The consensus price target fell 11% to €33.83, with the weaker earnings outlook clearly leading analyst valuation estimates. It could also be instructive to look at the range of analyst estimates, to evaluate how different the outlier opinions are from the mean. There are some variant perceptions on BE Semiconductor Industries, with the most bullish analyst valuing it at €40.00 and the most bearish at €26.00 per share. Analysts definitely have varying views on the business, but the spread of estimates is not wide enough in our view to suggest that extreme outcomes could await BE Semiconductor Industries shareholders.
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. We would highlight that BE Semiconductor Industries’s revenue growth is expected to slow, with forecast 0.5% increase next year well below the historical 5.7% 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 9.9% next year. So it’s pretty clear that, while revenue growth is expected to slow down, the wider industry is also expected to grow faster than BE Semiconductor Industries.
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 BE Semiconductor Industries. Unfortunately analysts also downgraded their revenue estimates, and industry data suggests that BE Semiconductor Industries’s revenues are expected to grow 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.
As you can see, the analysts clearly aren’t bullish, and there might be good reason for that. We’ve identified some potential issues with BE Semiconductor Industries’s financials, such as a weak balance sheet. For more information, you can click here to discover this and the 2 other concerns we’ve identified.
Another thing to consider is whether management and directors have been buying or selling stock recently. We provide an overview of all open market stock trades for the last twelve months on our platform, here.
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