Yidu Tech Inc. (HKG:2158) Analysts Are More Bearish Than They Used To Be

Today is shaping up negative for Yidu Tech Inc. (HKG:2158) 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 analysts factored in the latest outlook for the business, concluding that they were too optimistic previously.

Following the latest downgrade, the five analysts covering Yidu Tech provided consensus estimates of CN¥1.2b revenue in 2023, which would reflect a discernible 2.1% decline on its sales over the past 12 months. Losses are expected to be contained, narrowing 20% from last year to CN¥0.55. Yet before this consensus update, the analysts had been forecasting revenues of CN¥1.7b and losses of CN¥0.49 per share in 2023. Ergo, there's been a clear change in sentiment, with the analysts administering a notable cut to this year's revenue estimates, while at the same time increasing their loss per share forecasts.

Check out the opportunities and risks within the HK Healthcare Services industry.

The consensus price target fell 7.8% to CN¥20.40, implicitly signalling that lower earnings per share are a leading indicator for Yidu Tech's valuation. 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. Currently, the most bullish analyst values Yidu Tech at CN¥35.25 per share, while the most bearish prices it at CN¥5.28. So we wouldn't be assigning too much credibility to analyst price targets in this case, because there are clearly some widely differing views on what kind of performance this business can generate. With this in mind, we wouldn't rely too heavily on the consensus price target, as it is just an average and analysts clearly have some deeply divergent views on the business.

These estimates are interesting, but it can be useful to paint some more broad strokes when seeing how forecasts compare, both to the Yidu Tech's past performance and to peers in the same industry. We would highlight that sales are expected to reverse, with a forecast 4.2% annualised revenue decline to the end of 2023. That is a notable change from historical growth of 14% over the last year. Compare this with our data, which suggests that other companies in the same industry are, in aggregate, expected to see their revenue grow 17% per year. It's pretty clear that Yidu Tech's revenues are expected to perform substantially worse than the wider industry.

The Bottom Line

The most important thing to note from this downgrade is that the consensus increased its forecast losses this year, suggesting all may not be well at Yidu Tech. Unfortunately analysts also downgraded their revenue estimates, and industry data suggests that Yidu Tech'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 Yidu Tech.

Even so, the longer term trajectory of the business is much more important for the value creation of shareholders. At Simply Wall St, we have a full range of analyst estimates for Yidu Tech going out to 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.