Semiconductor Manufacturing International Corporation (HKG:981) Analysts Are More Bearish Than They Used To Be

Market forces rained on the parade of Semiconductor Manufacturing International Corporation (HKG:981) 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 downgrade, the consensus from 23 analysts covering Semiconductor Manufacturing International is for revenues of US$6.4b in 2023, implying a chunky 12% decline in sales compared to the last 12 months. Statutory earnings per share are anticipated to dive 62% to US$0.094 in the same period. Before this latest update, the analysts had been forecasting revenues of US$7.1b and earnings per share (EPS) of US$0.15 in 2023. It looks like analyst sentiment has declined substantially, with a measurable cut to revenue estimates and a large cut to earnings per share numbers as well.

Check out our latest analysis for Semiconductor Manufacturing International

The consensus price target fell 5.7% to US$2.27, 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. There are some variant perceptions on Semiconductor Manufacturing International, with the most bullish analyst valuing it at US$28.94 and the most bearish at US$13.51 per share. With such a wide range in price targets, the analysts are almost certainly betting on widely diverse outcomes for the underlying business. 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.

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. We would highlight that sales are expected to reverse, with a forecast 12% annualised revenue decline to the end of 2023. That is a notable change from historical growth of 17% 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 12% per year. So although its revenues are forecast to shrink, this cloud does not come with a silver lining - Semiconductor Manufacturing International 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 Semiconductor Manufacturing International. Regrettably, they also downgraded their revenue estimates, and the latest forecasts imply the business will grow sales slower than the wider market. With a serious cut to this year's expectations and a falling price target, we wouldn't be surprised if investors were becoming wary of Semiconductor Manufacturing International.

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 Semiconductor Manufacturing International 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.