ITM Power Plc (LON:ITM) Just Reported And Analysts Have Been Cutting Their Estimates

Last week saw the newest annual earnings release from ITM Power Plc (LON:ITM), an important milestone in the company's journey to build a stronger business. It looks like the results were pretty good overall. While revenues of UK£17m were in line with analyst predictions, statutory losses were much smaller than expected, with ITM Power losing UK£0.044 per share. Following the result, the analysts have updated their earnings model, and it would be good to know whether they think there's been a strong change in the company's prospects, or if it's business as usual. With this in mind, we've gathered the latest statutory forecasts to see what the analysts are expecting for next year.

See our latest analysis for ITM Power

Taking into account the latest results, the most recent consensus for ITM Power from 15 analysts is for revenues of UK£33.2m in 2025. If met, it would imply a sizeable 101% increase on its revenue over the past 12 months. Per-share losses are expected to explode, reaching UK£0.064 per share. Yet prior to the latest earnings, the analysts had been forecasting revenues of UK£38.8m and losses of UK£0.065 per share in 2025. We can see there's definitely been a change in sentiment in this update, with the analysts administering a meaningful downgrade to next year's revenue estimates, while at the same time reducing their loss estimates.

There was no major change to the UK£0.89average price target, suggesting that the adjustments to revenue and earnings are not expected to have a long-term impact on the business. 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. The most optimistic ITM Power analyst has a price target of UK£2.00 per share, while the most pessimistic values it at UK£0.45. So we wouldn't be assigning too much credibility to analyst price targets in this case, because there are clearly some widely different views on what kind of performance this business can generate. As a result it might not be a great idea to make decisions based on the consensus price target, which is after all just an average of this wide range of estimates.

Of course, another way to look at these forecasts is to place them into context against the industry itself. It's clear from the latest estimates that ITM Power's rate of growth is expected to accelerate meaningfully, with the forecast 101% annualised revenue growth to the end of 2025 noticeably faster than its historical growth of 20% p.a. over the past five years. By contrast, our data suggests that other companies (with analyst coverage) in a similar industry are forecast to grow their revenue at 17% per year. Factoring in the forecast acceleration in revenue, it's pretty clear that ITM Power is expected to grow much faster than its industry.

The Bottom Line

The most important thing to take away is that the analysts reconfirmed their loss per share estimates for next year. Regrettably, they also downgraded their revenue estimates, but the latest forecasts still imply the business will grow faster than the wider industry. Even so, earnings are more important to the intrinsic value of the business. There was no real change to the consensus price target, suggesting that the intrinsic value of the business has not undergone any major changes with the latest estimates.

Following on from that line of thought, we think that the long-term prospects of the business are much more relevant than next year's earnings. At Simply Wall St, we have a full range of analyst estimates for ITM Power going out to 2027, and you can see them free on our platform here..

It is also worth noting that we have found 2 warning signs for ITM Power (1 is concerning!) that you need to take into consideration.

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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.