SenseTime Group Inc. (HKG:20) Analysts Are Cutting Their Estimates: Here's What You Need To Know

The analysts might have been a bit too bullish on SenseTime Group Inc. (HKG:20), given that the company fell short of expectations when it released its yearly results last week. It was not a great statutory result, with revenues coming in 25% lower than the analysts predicted. Unsurprisingly, earnings also fell seriously short of forecasts, turning into a per-share loss of CN¥0.19. The analysts typically update their forecasts at each earnings report, and we can judge from their estimates whether their view of the company has changed or if there are any new concerns to be aware of. So we gathered the latest post-earnings forecasts to see what estimates suggest is in store for next year.

See our latest analysis for SenseTime Group

Taking into account the latest results, the current consensus from SenseTime Group's ten analysts is for revenues of CN¥5.22b in 2023, which would reflect a major 37% increase on its sales over the past 12 months. The loss per share is expected to greatly reduce in the near future, narrowing 34% to CN¥0.12. Yet prior to the latest earnings, the analysts had been forecasting revenues of CN¥7.03b and losses of CN¥0.10 per share in 2023. There's been a definite change in sentiment in this update, with the analysts administering a notable cut to next year's revenue estimates, while at the same time increasing their loss per share forecasts.

The analysts lifted their price target 15% to HK$3.07, implicitly signalling that lower earnings per share are not expected to have a longer-term impact on the stock's value. 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 HK$3.59 and the most bearish at HK$2.20 per share. Analysts definitely have varying views on the business, but the spread of estimates is not wide enough in our view to suggest that extreme outcomes could await SenseTime Group shareholders.

One way to get more context on these forecasts is to look at how they compare to both past performance, and how other companies in the same industry are performing. It's clear from the latest estimates that SenseTime Group's rate of growth is expected to accelerate meaningfully, with the forecast 37% annualised revenue growth to the end of 2023 noticeably faster than its historical growth of 9.4% p.a. over the past three years. By contrast, our data suggests that other companies (with analyst coverage) in a similar industry are forecast to grow their revenue at 23% per year. It seems obvious that, while the growth outlook is brighter than the recent past, the analysts also expect SenseTime Group to grow faster than the wider industry.

The Bottom Line

The most important thing to note is the forecast of increased losses next year, suggesting all may not be well at SenseTime Group. They also downgraded their revenue estimates, although industry data suggests that SenseTime Group's revenues are expected to grow faster than the wider industry. There was also a nice increase in the price target, with the analysts clearly feeling that the intrinsic value of the business is improving.

Following on from that line of thought, we think that the long-term prospects of the business are much more relevant than next year's earnings. We have estimates - from multiple SenseTime Group analysts - going out to 2025, and you can see them free on our platform here.

Even so, be aware that SenseTime Group is showing 1 warning sign in our investment analysis , you should know about...

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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.