GCL Technology Holdings Limited (HKG:3800) Analysts Just Cut Their EPS Forecasts Substantially

The analysts covering GCL Technology Holdings Limited (HKG:3800) delivered a dose of negativity to shareholders today, by making a substantial revision to their statutory forecasts for this year. Both revenue and earnings per share (EPS) forecasts went under the knife, suggesting the analysts have soured majorly on the business. At HK$1.29, shares are up 9.3% in the past 7 days. We'd be curious to see if the downgrade is enough to reverse investor sentiment on the business.

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After the downgrade, the 14 analysts covering GCL Technology Holdings are now predicting revenues of CN¥15b in 2025. If met, this would reflect a sizeable 25% improvement in sales compared to the last 12 months. Losses are predicted to fall substantially, shrinking 61% to CN¥0.069 per share. Yet prior to the latest estimates, the analysts had been forecasting revenues of CN¥17b and losses of CN¥0.03 per share in 2025. 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 our latest analysis for GCL Technology Holdings

The consensus price target was broadly unchanged at CN¥1.40, perhaps implicitly signalling that the weaker earnings outlook is not expected to have a long-term impact on the valuation. Fixating on a single price target can be unwise though, since the consensus target is effectively the average of analyst price targets. As a result, some investors like to look at the range of estimates to see if there are any diverging opinions on the company's valuation. Currently, the most bullish analyst values GCL Technology Holdings at CN¥1.74 per share, while the most bearish prices it at CN¥0.88. This is a fairly broad spread of estimates, suggesting that the analysts are forecasting a wide range of possible outcomes for the 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. The analysts are definitely expecting GCL Technology Holdings' growth to accelerate, with the forecast 57% annualised growth to the end of 2025 ranking favourably alongside historical growth of 4.1% per annum over the past five years. Compare this with other companies in the same industry, which are forecast to grow their revenue 16% annually. It seems obvious that, while the growth outlook is brighter than the recent past, the analysts also expect GCL Technology Holdings to grow faster 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 GCL Technology Holdings. 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 GCL Technology Holdings after the downgrade.

Even so, the longer term trajectory of the business is much more important for the value creation of shareholders. We have estimates - from multiple GCL Technology Holdings analysts - going out to 2027, 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 with high insider ownership.

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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.