Need To Know: This Analyst Just Made A Substantial Cut To Their Smarter Microelectronics (Guangzhou) Co., Ltd. (SHSE:688512) Estimates

Today is shaping up negative for Smarter Microelectronics (Guangzhou) Co., Ltd. (SHSE:688512) shareholders, with the covering analyst delivering a substantial negative revision to this year's forecasts. Both revenue and earnings per share (EPS) forecasts went under the knife, suggesting the analyst has soured majorly on the business.

After this downgrade, Smarter Microelectronics (Guangzhou)'s lone analyst is now forecasting revenues of CN¥699m in 2024. This would be a huge 30% improvement in sales compared to the last 12 months. Losses are predicted to fall substantially, shrinking 31% to CN¥0.64 per share. However, before this estimates update, the consensus had been expecting revenues of CN¥917m and CN¥0.38 per share in losses. So there's been quite a change-up of views after the recent consensus updates, with the analyst making a serious cut to their revenue forecasts while also expecting losses per share to increase.

See our latest analysis for Smarter Microelectronics (Guangzhou)

The consensus price target fell 24% to CN¥15.40, implicitly signalling that lower earnings per share are a leading indicator for Smarter Microelectronics (Guangzhou)'s valuation.

Of course, another way to look at these forecasts is to place them into context against the industry itself. It's pretty clear that there is an expectation that Smarter Microelectronics (Guangzhou)'s revenue growth will slow down substantially, with revenues to the end of 2024 expected to display 30% growth on an annualised basis. This is compared to a historical growth rate of 44% over the past year. Juxtapose this against the other companies in the industry with analyst coverage, which are forecast to grow their revenues (in aggregate) 23% per year. Even after the forecast slowdown in growth, it seems obvious that Smarter Microelectronics (Guangzhou) is also expected to grow faster than the wider industry.

The Bottom Line

The most important thing to note from this downgrade is that the consensus increased its forecast losses this year, suggesting all may not be well at Smarter Microelectronics (Guangzhou). Unfortunately, the analyst also downgraded their revenue estimates, although our data indicates revenues are expected to perform better 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.

With that said, the long-term trajectory of the company's earnings is a lot more important than next year. At least one analyst has provided forecasts out to 2026, which can be seen for 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.