Bearish: Analysts Just Cut Their Atlantic Sapphire ASA (OB:ASA) Revenue and EPS estimates

The latest analyst coverage could presage a bad day for Atlantic Sapphire ASA (OB:ASA), with the analysts making across-the-board cuts to their statutory estimates that might leave shareholders a little shell-shocked. Both revenue and earnings per share (EPS) forecasts went under the knife, suggesting analysts have soured majorly on the business.

Following the downgrade, the current consensus from Atlantic Sapphire's six analysts is for revenues of US$45m in 2022 which - if met - would reflect a major 170% increase on its sales over the past 12 months. The loss per share is anticipated to greatly reduce in the near future, narrowing 80% to US$0.29. However, before this estimates update, the consensus had been expecting revenues of US$64m and US$0.085 per share in losses. 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.

View our latest analysis for Atlantic Sapphire

The consensus price target fell 20% to kr44.60, with the analysts clearly concerned about the company following the weaker revenue and earnings outlook. 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. Currently, the most bullish analyst values Atlantic Sapphire at kr50.00 per share, while the most bearish prices it at kr45.00. This is a very narrow spread of estimates, implying either that Atlantic Sapphire is an easy company to value, or - more likely - the analysts are relying heavily on some key assumptions.

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 Atlantic Sapphire's rate of growth is expected to accelerate meaningfully, with the forecast 170% annualised revenue growth to the end of 2022 noticeably faster than its historical growth of 60% p.a. over the past five years. By contrast, our data suggests that other companies (with analyst coverage) in a similar industry are forecast to grow their revenue at 4.6% per year. It seems obvious that, while the growth outlook is brighter than the recent past, the analysts also expect Atlantic Sapphire 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 Atlantic Sapphire. Unfortunately, analysts also downgraded their revenue estimates, although our data indicates revenues are expected to 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.

After a downgrade like this, it's pretty clear that previous forecasts were too optimistic. What's more, we've spotted several possible issues with Atlantic Sapphire's business, like a short cash runway. For more information, you can click here to discover this and the 1 other warning sign we've identified.

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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.