Downgrade: Here's How Analysts See Funding Circle Holdings plc (LON:FCH) Performing In The Near Term

Market forces rained on the parade of Funding Circle Holdings plc (LON:FCH) shareholders today, when the analysts downgraded their forecasts for this year. Revenue and earnings per share (EPS) forecasts were both revised downwards, with the analysts seeing grey clouds on the horizon. Investors however, have been notably more optimistic about Funding Circle Holdings recently, with the stock price up a noteworthy 11% to UK£0.49 in the past week. It will be interesting to see if the downgrade has an impact on buying demand for the company's shares.

Following the downgrade, the latest consensus from Funding Circle Holdings' three analysts is for revenues of UK£172m in 2024, which would reflect an okay 2.4% improvement in sales compared to the last 12 months. The loss per share is anticipated to greatly reduce in the near future, narrowing 43% to UK£0.062. Yet before this consensus update, the analysts had been forecasting revenues of UK£188m and losses of UK£0.062 per share in 2024. There doesn't appear to have been a major change in analyst sentiment following this consensus update, with a cut to revenue and no change to loss per share estimates.

See our latest analysis for Funding Circle Holdings

There was no real change to the consensus price target of UK£1.25, suggesting that the revisions to revenue estimates are not expected to have a long-term impact on Funding Circle Holdings' valuation.

Looking at the bigger picture now, one of the ways we can make sense of these forecasts is to see how they measure up against both past performance and industry growth estimates. We would highlight that Funding Circle Holdings' revenue growth is expected to slow, with the forecast 2.4% annualised growth rate until the end of 2024 being well below the historical 4.5% 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 18% annually. So it's pretty clear that, while revenue growth is expected to slow down, the wider industry is also expected to grow faster than Funding Circle Holdings.

The Bottom Line

Unfortunately analysts also downgraded their revenue estimates, and industry data suggests that Funding Circle Holdings' revenues are expected to grow slower than the wider market. The lack of change in the price target is puzzling in light of the downgrade but, with a serious decline expected this year, we wouldn't be surprised if investors were a bit wary of Funding Circle Holdings.

With that said, the long-term trajectory of the company's earnings is a lot more important than next year. We have estimates - from multiple Funding Circle Holdings analysts - going out to 2026, 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.