Things Look Grim For tinyBuild, Inc. (LON:TBLD) After Today's Downgrade

Market forces rained on the parade of tinyBuild, Inc. (LON:TBLD) shareholders today, when the analysts downgraded their forecasts for this year. Both revenue and earnings per share (EPS) estimates were cut sharply as analysts factored in the latest outlook for the business, concluding that they were too optimistic previously.

Following the latest downgrade, the five analysts covering tinyBuild provided consensus estimates of US$51m revenue in 2023, which would reflect a considerable 20% decline on its sales over the past 12 months. Statutory earnings per share are anticipated to crater 93% to US$0.004 in the same period. Before this latest update, the analysts had been forecasting revenues of US$70m and earnings per share (EPS) of US$0.081 in 2023. Indeed, we can see that the analysts are a lot more bearish about tinyBuild's prospects, administering a pretty serious reduction to revenue estimates and slashing their EPS estimates to boot.

See our latest analysis for tinyBuild

The consensus price target fell 70% to UK£0.40, with the weaker earnings outlook clearly leading analyst valuation estimates. It could also be instructive to look at the range of analyst estimates, to evaluate how different the outlier opinions are from the mean. The most optimistic tinyBuild analyst has a price target of UK£0.55 per share, while the most pessimistic values it at UK£0.25. Note the wide gap in analyst price targets? This implies to us that there is a fairly broad range of possible scenarios for the underlying business.

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. These estimates imply that sales are expected to slow, with a forecast annualised revenue decline of 20% by the end of 2023. This indicates a significant reduction from annual growth of 25% over the last five years. Compare this with our data, which suggests that other companies in the same industry are, in aggregate, expected to see their revenue grow 5.4% per year. So although its revenues are forecast to shrink, this cloud does not come with a silver lining - tinyBuild is expected to lag the wider industry.

The Bottom Line

The biggest issue in the new estimates is that analysts have reduced their earnings per share estimates, suggesting business headwinds lay ahead for tinyBuild. Unfortunately analysts also downgraded their revenue estimates, and industry data suggests that tinyBuild's revenues are expected to grow slower than the wider market. After such a stark change in sentiment from analysts, we'd understand if readers now felt a bit wary of tinyBuild.

That said, the analysts might have good reason to be negative on tinyBuild, given concerns around earnings quality. Learn more, and discover the 1 other risk we've identified, for 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.