Time To Worry? Analysts Are Downgrading Their Starbreeze AB (publ) (STO:STAR B) Outlook

One thing we could say about the analysts on Starbreeze AB (publ) (STO:STAR B) - they aren't optimistic, having just made a major negative revision to their near-term (statutory) forecasts for the organization. Both revenue and earnings per share (EPS) estimates were cut sharply as the analysts factored in the latest outlook for the business, concluding that they were too optimistic previously.

Following the latest downgrade, the two analysts covering Starbreeze provided consensus estimates of kr171m revenue in 2024, which would reflect a substantial 73% decline on its sales over the past 12 months. Following this this downgrade, earnings are now expected to tip over into loss-making territory, with the analysts forecasting losses of kr0.06 per share in 2024. However, before this estimates update, the consensus had been expecting revenues of kr209m and kr0.02 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.

Check out our latest analysis for Starbreeze

The consensus price target fell 25% to kr0.53, with the analysts clearly concerned about the company following the weaker revenue and earnings outlook.

Of course, another way to look at these forecasts is to place them into context against the industry itself. These estimates imply that sales are expected to slow, with a forecast annualised revenue decline of 73% by the end of 2024. This indicates a significant reduction from annual growth of 3.0% 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 4.6% per year. It's pretty clear that Starbreeze's revenues are expected to perform substantially worse 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 Starbreeze. Regrettably, they also downgraded their revenue estimates, and the latest forecasts imply the business will grow sales slower than the wider market. With a serious cut to this year's expectations and a falling price target, we wouldn't be surprised if investors were becoming wary of Starbreeze.

As you can see, the analysts clearly aren't bullish, and there might be good reason for that. We've identified some potential issues with Starbreeze's financials, such as major dilution from new stock issuance in the past year. Learn more, and discover the 2 other risks we've identified, for 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.

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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.