Need To Know: The Consensus Just Cut Its Syrah Resources Limited (ASX:SYR) Estimates For 2023

The latest analyst coverage could presage a bad day for Syrah Resources Limited (ASX:SYR), 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 the analysts signalled a weaker outlook - perhaps a sign that investors should temper their expectations as well.

Following the downgrade, the most recent consensus for Syrah Resources from its three analysts is for revenues of US$145m in 2023 which, if met, would be a sizeable 36% increase on its sales over the past 12 months. Before the latest update, the analysts were foreseeing US$197m of revenue in 2023. It looks like forecasts have become a fair bit less optimistic on Syrah Resources, given the sizeable cut to revenue estimates.

See our latest analysis for Syrah Resources

The consensus price target fell 13% to AU$1.87, with the analysts clearly less optimistic about Syrah Resources' valuation following this update. The consensus price target is just an average of individual analyst targets, so - it could be handy to see how wide the range of underlying estimates is. There are some variant perceptions on Syrah Resources, with the most bullish analyst valuing it at AU$2.35 and the most bearish at AU$1.25 per share. This shows there is still some 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.

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 can infer from the latest estimates that forecasts expect a continuation of Syrah Resources'historical trends, as the 36% annualised revenue growth to the end of 2023 is roughly in line with the 38% annual revenue growth over the past five years. Compare this with the broader industry, which analyst estimates (in aggregate) suggest will see revenues grow 1.8% annually. So it's pretty clear that Syrah Resources is forecast to grow substantially faster than its industry.

The Bottom Line

The most important thing to take away is that analysts cut their revenue estimates for this year. They're also forecasting more rapid revenue growth than the wider market. Furthermore, there was a cut to the price target, suggesting that the latest news has led to more pessimism about the intrinsic value of the business. 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 Syrah Resources after today.

After a downgrade like this, it's pretty clear that previous forecasts were too optimistic. What's more, we've spotted several possible issues with Syrah Resources' business, like recent substantial insider selling. For more information, you can click here to discover this and the 1 other warning sign we've identified.

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.