Analysts Just Shaved Their SenseTime Group Inc. (HKG:20) Forecasts Dramatically

The latest analyst coverage could presage a bad day for SenseTime Group Inc. (HKG:20), with the analysts making across-the-board cuts to their statutory estimates that might leave shareholders a little shell-shocked. Revenue and earnings per share (EPS) forecasts were both revised downwards, with analysts seeing grey clouds on the horizon.

After the downgrade, the ten analysts covering SenseTime Group are now predicting revenues of CN¥4.4b in 2023. If met, this would reflect a decent 15% improvement in sales compared to the last 12 months. Losses are predicted to fall substantially, shrinking 22% to CN¥0.14 per share. Yet before this consensus update, the analysts had been forecasting revenues of CN¥5.0b and losses of CN¥0.12 per share in 2023. So there's been quite a change-up of views after the recent consensus updates, with the analysts making a serious cut to their revenue forecasts while also expecting losses per share to increase.

See our latest analysis for SenseTime Group

The consensus price target fell 30% to CN¥2.02, implicitly signalling that lower earnings per share are a leading indicator for SenseTime Group's 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. There are some variant perceptions on SenseTime Group, with the most bullish analyst valuing it at CN¥3.16 and the most bearish at CN¥1.49 per share. Note the wide gap in analyst price targets? This implies to us that there is a fairly broad range of possible scenarios for the underlying business.

Another way we can view these estimates is in the context of the bigger picture, such as how the forecasts stack up against past performance, and whether forecasts are more or less bullish relative to other companies in the industry. For example, we noticed that SenseTime Group's rate of growth is expected to accelerate meaningfully, with revenues forecast to exhibit 15% growth to the end of 2023 on an annualised basis. That is well above its historical decline of 14% a year over the past year. By contrast, our data suggests that other companies (with analyst coverage) in a similar industry are forecast to see their revenue grow 22% per year. So although SenseTime Group's revenue growth is expected to improve, it is still expected to grow slower than the industry.

The Bottom Line

The most important thing to take away is that analysts increased their loss per share estimates for this year. Regrettably, they also downgraded their revenue estimates, and the latest forecasts imply the business will grow sales slower 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.

Still, the long-term prospects of the business are much more relevant than next year's earnings. At Simply Wall St, we have a full range of analyst estimates for SenseTime Group going out to 2025, 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. 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.