Analysts Just Shaved Their Calix Limited (ASX:CXL) Forecasts Dramatically

Market forces rained on the parade of Calix Limited (ASX:CXL) shareholders today, when the analysts downgraded their forecasts for this year. Both revenue and earnings per share (EPS) estimates were cut sharply as analysts factored in the latest outlook for the business, concluding that they were too optimistic previously.

Following the downgrade, the current consensus from Calix's twin analysts is for revenues of AU$23m in 2023 which - if met - would reflect a huge 26% increase on its sales over the past 12 months. Losses are predicted to fall substantially, shrinking 33% to AU$0.068. Yet prior to the latest estimates, the analysts had been forecasting revenues of AU$27m and losses of AU$0.061 per share in 2023. Ergo, there's been a clear change in sentiment, with the analysts administering a notable cut to this year's revenue estimates, while at the same time increasing their loss per share forecasts.

See our latest analysis for Calix

The consensus price target was broadly unchanged at AU$9.25, perhaps implicitly signalling that the weaker earnings outlook is not expected to have a long-term impact on the 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 Calix analyst has a price target of AU$10.00 per share, while the most pessimistic values it at AU$8.50. Even so, with a relatively close grouping of estimates, it looks like the analysts are quite confident in their valuations, suggesting Calix is an easy business to forecast or the underlying assumptions are obvious.

Taking a look at the bigger picture now, one of the ways we can understand these forecasts is to see how they compare to both past performance and industry growth estimates. It's pretty clear that there is an expectation that Calix's revenue growth will slow down substantially, with revenues to the end of 2023 expected to display 26% growth on an annualised basis. This is compared to a historical growth rate of 41% over the past five years. By way of comparison, the other companies in this industry with analyst coverage are forecast to grow their revenue at 6.7% annually. So it's pretty clear that, while Calix'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 analysts increased their loss per share estimates for this year. While analysts did downgrade their revenue estimates, these forecasts still imply revenues will perform better than the wider market. The lack of change in the price target is puzzling in light of the downgrade but, with a serious decline expected this year, we wouldn't be surprised if investors were a bit wary of Calix.

Still, the long-term prospects of the business are much more relevant than next year's earnings. We have analyst estimates for Calix going out as far as 2025, and you can see them free on our platform here.

Another way to search for interesting companies that could be reaching an inflection point is to track whether management are buying or selling, with our free list of growing companies that insiders are buying.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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.