One Analyst Just Downgraded Their Seeka Limited (NZSE:SEK) Outlook

Today is shaping up negative for Seeka Limited (NZSE:SEK) shareholders, with the covering analyst delivering a substantial negative revision to this year's forecasts. Revenue and earnings per share (EPS) forecasts were both revised downwards, with the analyst seeing grey clouds on the horizon.

Following the downgrade, the consensus from lone analyst covering Seeka is for revenues of NZ$305m in 2023, implying a chunky 13% decline in sales compared to the last 12 months. Following this this downgrade, earnings are now expected to tip over into loss-making territory, with the analyst forecasting losses of NZ$0.044 per share in 2023. Previously, the analyst had been modelling revenues of NZ$349m and earnings per share (EPS) of NZ$0.16 in 2023. There looks to have been a major change in sentiment regarding Seeka's prospects, with a measurable cut to revenues and the analyst now forecasting a loss instead of a profit.

Check out our latest analysis for Seeka

The consensus price target fell 6.6% to NZ$2.85, with the analyst clearly concerned about the company following the weaker revenue and earnings outlook.

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. These estimates imply that sales are expected to slow, with a forecast annualised revenue decline of 13% by the end of 2023. This indicates a significant reduction from annual growth of 13% 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 8.0% per year. So although its revenues are forecast to shrink, this cloud does not come with a silver lining - Seeka is expected to lag the wider industry.

The Bottom Line

The biggest low-light for us was that the forecasts for Seeka dropped from profits to a loss this year. Regrettably, they also downgraded their revenue estimates, and the latest forecasts imply the business will grow sales slower than the wider market. After such a stark change in sentiment from the analyst, we'd understand if readers now felt a bit wary of Seeka.

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 Seeka's business, like its declining profit margins. Learn more, and discover the 2 other flags we've identified, for 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.