These Analysts Just Made A Huge Downgrade To Their Alibaba Health Information Technology Limited (HKG:241) EPS Forecasts

Market forces rained on the parade of Alibaba Health Information Technology Limited (HKG:241) 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.

After this downgrade, Alibaba Health Information Technology's 14 analysts are now forecasting revenues of CN¥24b in 2022. This would be a sizeable 54% improvement in sales compared to the last 12 months. Per-share earnings are expected to grow 17% to CN¥0.031. Previously, the analysts had been modelling revenues of CN¥27b and earnings per share (EPS) of CN¥0.049 in 2022. It looks like analyst sentiment has declined substantially, with a substantial drop in revenue estimates and a large cut to earnings per share numbers as well.

View our latest analysis for Alibaba Health Information Technology

It'll come as no surprise then, to learn that the analysts have cut their price target 10% to CN¥23.46. 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. The most optimistic Alibaba Health Information Technology analyst has a price target of CN¥50.17 per share, while the most pessimistic values it at CN¥22.35. 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. As a result it might not be possible to derive much meaning from the consensus price target, which is after all just an average of this wide range of estimates.

Of course, another way to look at these forecasts is to place them into context against the industry itself. The period to the end of 2022 brings more of the same, according to the analysts, with revenue forecast to display 54% growth on an annualised basis. That is in line with its 60% annual growth over the past five years. By contrast, our data suggests that other companies (with analyst coverage) in a similar industry are forecast to see their revenues grow 21% per year. So it's pretty clear that Alibaba Health Information Technology is forecast to grow substantially faster than its industry.

The Bottom Line

The most important thing to take away is that analysts cut their earnings per share estimates, expecting a clear decline in business conditions. While analysts did downgrade their revenue estimates, these forecasts still imply revenues will perform better than the wider market. Given the scope of the downgrades, it would not be a surprise to see the market become more wary of the business.

With that said, the long-term trajectory of the company's earnings is a lot more important than next year. At Simply Wall St, we have a full range of analyst estimates for Alibaba Health Information Technology 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. 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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