Analysts Just Shaved Their Argo Blockchain plc (LON:ARB) Forecasts Dramatically

Today is shaping up negative for Argo Blockchain plc (LON:ARB) shareholders, with the analysts delivering a substantial negative revision to this year's forecasts. Both revenue and earnings per share (EPS) estimates were cut sharply as the analysts factored in the latest outlook for the business, concluding that they were too optimistic previously.

Following the downgrade, the latest consensus from Argo Blockchain's dual analysts is for revenues of UK£58m in 2021, which would reflect a major 208% improvement in sales compared to the last 12 months. Per-share earnings are expected to shoot up 1,299% to UK£0.067. Before this latest update, the analysts had been forecasting revenues of UK£69m and earnings per share (EPS) of UK£0.10 in 2021. Indeed, we can see that the analysts are a lot more bearish about Argo Blockchain's prospects, administering a substantial drop in revenue estimates and slashing their EPS estimates to boot.

See our latest analysis for Argo Blockchain

Despite the cuts to forecast earnings, there was no real change to the UK£2.35 price target, showing that the analysts don't think the changes have a meaningful impact on its intrinsic value. 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 Argo Blockchain analyst has a price target of UK£2.50 per share, while the most pessimistic values it at UK£2.40. This is a very narrow spread of estimates, implying either that Argo Blockchain is an easy company to value, or - more likely - the analysts are relying heavily on some key assumptions.

Taking a look at the bigger picture now, one of the ways we can understand these forecasts is to see how they compare to both past performance and industry growth estimates. It's clear from the latest estimates that Argo Blockchain's rate of growth is expected to accelerate meaningfully, with the forecast 208% annualised revenue growth to the end of 2021 noticeably faster than its historical growth of 119% over the past year. By contrast, our data suggests that other companies (with analyst coverage) in a similar industry are forecast to grow their revenue at 11% per year. It seems obvious that, while the growth outlook is brighter than the recent past, the analysts also expect Argo Blockchain to grow faster than 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 Argo Blockchain. Unfortunately, analysts also downgraded their revenue estimates, although our data indicates revenues are expected to perform better than the wider market. We're also surprised to see that the price target went unchanged. Still, deteriorating business conditions (assuming accurate forecasts!) can be a leading indicator for the stock price, so we wouldn't blame investors for being more cautious on Argo Blockchain after the downgrade.

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 2022, which can be seen 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. 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.
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