Revenue Downgrade: Here's What Analysts Forecast For Atlantic Sapphire ASA (OB:ASA)

Market forces rained on the parade of Atlantic Sapphire ASA (OB:ASA) shareholders today, when the analysts downgraded their forecasts for this year. This report focused on revenue estimates, and it looks as though the consensus view of the business has become substantially more conservative.

After the downgrade, the six analysts covering Atlantic Sapphire are now predicting revenues of US$20m in 2022. If met, this would reflect a huge 25% improvement in sales compared to the last 12 months. The loss per share is anticipated to greatly reduce in the near future, narrowing 54% to US$0.29. Yet prior to the latest estimates, the analysts had been forecasting revenues of US$37m and losses of US$0.23 per share in 2022. 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.

Our analysis indicates that ASA is potentially overvalued!

The consensus price target fell 42% to US$1.78, with the analysts clearly concerned about the company following the weaker revenue and earnings outlook. The consensus price target is just an average of individual analyst targets, so - it could be handy to see how wide the range of underlying estimates is. The most optimistic Atlantic Sapphire analyst has a price target of US$50.07 per share, while the most pessimistic values it at US$24.32. We would probably assign less value to the forecasts in this situation, because such a wide range of estimates could imply that the future of this business is difficult to value accurately. As a result it might not be possible to derive much meaning from the consensus price target, which is after all just an average of this wide range of estimates.

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. The period to the end of 2022 brings more of the same, according to the analysts, with revenue forecast to display 55% growth on an annualised basis. That is in line with its 54% annual growth over the past three years. By contrast, our data suggests that other companies (with analyst coverage) in a similar industry are forecast to see their revenues grow 5.6% per year. So although Atlantic Sapphire is expected to maintain its revenue growth rate, it's definitely expected 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. The consensus price target fell measurably, with analysts seemingly not reassured by recent business developments, leading to a lower estimate of Atlantic Sapphire's future valuation. Overall, given the drastic downgrade to this year's forecasts, we'd be feeling a little more wary of Atlantic Sapphire going forwards.

That said, the analysts might have good reason to be negative on Atlantic Sapphire, given a short cash runway. For more information, you can click here to discover this and the 1 other concern we've identified.

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.