Today is shaping up negative for ITM Power Plc (LON:ITM) shareholders, with the analysts delivering a substantial negative revision to this year's forecasts. There was a fairly draconian cut to their revenue estimates, perhaps an implicit admission that previous forecasts were much too optimistic. The stock price has risen 6.5% to UK£2.99 over the past week. It will be interesting to see if this downgrade motivates investors to start selling their holdings.
After this downgrade, ITM Power's 19 analysts are now forecasting revenues of UK£13m in 2022. This would be a huge 42% improvement in sales compared to the last 12 months. Before the latest update, the analysts were foreseeing UK£15m of revenue in 2022. The consensus view seems to have become more pessimistic on ITM Power, noting the measurable cut to revenue estimates in this update.
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. 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 2022 noticeably faster than its historical growth of 21% p.a. over the past five years. Compare this with other companies in the same industry, which are forecast to grow their revenue 28% annually. 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 clear low-light was that analysts slashing their revenue forecasts for ITM Power this year. They're also forecasting more rapid revenue growth than the wider market. Given the stark change in sentiment, we'd understand if investors became more cautious on ITM Power after today.
Want to learn more? We have estimates for ITM Power from its 19 analysts out until 2025, and you can see them free on our platform here.
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.