What Does The Future Hold For Columbia Care Inc. (CSE:CCHW)? These Analysts Have Been Cutting Their Estimates

One thing we could say about the analysts on Columbia Care Inc. (CSE:CCHW) - they aren't optimistic, having just made a major negative revision to their near-term (statutory) forecasts for the organization. This report focused on revenue estimates, and it looks as though the consensus view of the business has become substantially more conservative.

Following the downgrade, the current consensus from Columbia Care's seven analysts is for revenues of US$524m in 2023 which - if met - would reflect a modest 2.4% increase on its sales over the past 12 months. Losses are predicted to fall substantially, shrinking 85% to US$0.15. However, before this estimates update, the consensus had been expecting revenues of US$617m and US$0.15 per share in losses. So there's been quite a change-up of views after the recent consensus updates, with the analysts making a serious cut to their revenue forecasts while also making no real change to the loss per share numbers.

Check out our latest analysis for Columbia Care

The consensus price target fell 15% to US$3.00, with the analysts clearly concerned about the weaker revenue outlook and expectation of ongoing losses. Fixating on a single price target can be unwise though, since the consensus target is effectively the average of analyst price targets. As a result, some investors like to look at the range of estimates to see if there are any diverging opinions on the company's valuation. Currently, the most bullish analyst values Columbia Care at US$9.22 per share, while the most bearish prices it at US$1.49. We would probably assign less value to the forecasts in this situation, because such a wide range of estimates could imply that the future of this business is difficult to value accurately. With this in mind, we wouldn't rely too heavily on the consensus price target, as it is just an average and analysts clearly have some deeply divergent views on the business.

Another way we can view these estimates is in the context of the bigger picture, such as how the forecasts stack up against past performance, and whether forecasts are more or less bullish relative to other companies in the industry. We would highlight that Columbia Care's revenue growth is expected to slow, with the forecast 2.4% annualised growth rate until the end of 2023 being well below the historical 56% 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 14% annually. Factoring in the forecast slowdown in growth, it seems obvious that Columbia Care is also expected to grow slower than other industry participants.

The Bottom Line

Unfortunately analysts also downgraded their revenue estimates, and industry data suggests that Columbia Care's revenues are expected to grow slower 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. Given the stark change in sentiment, we'd understand if investors became more cautious on Columbia Care after today.

Even so, the longer term trajectory of the business is much more important for the value creation of shareholders. We have estimates - from multiple Columbia Care analysts - going out to 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.

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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.