Downgrade: Here's How Analysts See Azelio AB (publ) (STO:AZELIO) Performing In The Near Term

Today is shaping up negative for Azelio AB (publ) (STO:AZELIO) shareholders, with the analysts delivering a substantial negative revision to next year's forecasts. Both revenue and earnings per share (EPS) forecasts went under the knife, suggesting the analysts have soured majorly on the business.

After the downgrade, the three analysts covering Azelio are now predicting revenues of kr470m in 2022. If met, this would reflect a major 215% improvement in sales compared to the last 12 months. The loss per share is anticipated to greatly reduce in the near future, narrowing 22% to kr2.06. However, before this estimates update, the consensus had been expecting revenues of kr655m and kr1.55 per share in losses. Ergo, there's been a clear change in sentiment, with the analysts administering a notable cut to next year's revenue estimates, while at the same time increasing their loss per share forecasts.

View our latest analysis for Azelio

The consensus price target was broadly unchanged at kr45.83, perhaps implicitly signalling that the weaker earnings outlook is not expected to have a long-term impact on the valuation. 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. There are some variant perceptions on Azelio, with the most bullish analyst valuing it at kr60.00 and the most bearish at kr35.00 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 Azelio shareholders.

Of course, another way to look at these forecasts is to place them into context against the industry itself. It's clear from the latest estimates that Azelio's rate of growth is expected to accelerate meaningfully, with the forecast 151% annualised revenue growth to the end of 2022 noticeably faster than its historical growth of 18% p.a. over the past five years. Compare this with other companies in the same industry, which are forecast to grow their revenue 33% annually. Factoring in the forecast acceleration in revenue, it's pretty clear that Azelio is expected to grow much faster than its industry.

The Bottom Line

The most important thing to note from this downgrade is that the consensus increased its forecast losses next year, suggesting all may not be well at Azelio. Unfortunately, analysts also downgraded their revenue estimates, although our data indicates revenues are expected to perform better than the wider market. We're also surprised to see that the price target went unchanged. Still, deteriorating business conditions (assuming accurate forecasts!) can be a leading indicator for the stock price, so we wouldn't blame investors for being more cautious on Azelio after the downgrade.

With that said, the long-term trajectory of the company's earnings is a lot more important than next year. We have estimates - from multiple Azelio analysts - going out to 2023, 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.

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.

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