What You Need To Know About The Ayr Wellness Inc. (CSE:AYR.A) Analyst Downgrade Today

The analysts covering Ayr Wellness Inc. (CSE:AYR.A) delivered a dose of negativity to shareholders today, by making a substantial revision to their statutory forecasts for this year. Revenue estimates were cut sharply as analysts signalled a weaker outlook - perhaps a sign that investors should temper their expectations as well.

Following the downgrade, the current consensus from Ayr Wellness' ten analysts is for revenues of US$490m in 2022 which - if met - would reflect a meaningful 14% increase on its sales over the past 12 months. Losses are supposed to balloon 233% to US$1.23 per share. Yet prior to the latest estimates, the analysts had been forecasting revenues of US$559m and losses of US$1.18 per share in 2022. 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.

Check out our latest analysis for Ayr Wellness

The consensus price target fell 21% to CA$35.50, implicitly signalling that lower earnings per share are a leading indicator for Ayr Wellness' valuation. 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 Ayr Wellness at CA$55.00 per share, while the most bearish prices it at CA$40.00. There are definitely some different views on the stock, but the range of estimates is not wide enough as to imply that the situation is unforecastable, in our view.

These estimates are interesting, but it can be useful to paint some more broad strokes when seeing how forecasts compare, both to the Ayr Wellness' past performance and to peers in the same industry. We would highlight that Ayr Wellness' revenue growth is expected to slow, with the forecast 30% annualised growth rate until the end of 2022 being well below the historical 70% p.a. growth over the last three years. Juxtapose this against the other companies in the industry with analyst coverage, which are forecast to grow their revenues (in aggregate) 22% per year. So it's pretty clear that, while Ayr Wellness' 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 consensus price target fell measurably, with analysts seemingly not reassured by recent business developments, leading to a lower estimate of Ayr Wellness' future valuation. 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 Ayr Wellness after today.

Even so, the longer term trajectory of the business is much more important for the value creation of shareholders. At Simply Wall St, we have a full range of analyst estimates for Ayr Wellness going out to 2024, 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.

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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.