Analyst Forecasts Just Got A Lot More Bearish On FTC Solar, Inc. (NASDAQ:FTCI)

The latest analyst coverage could presage a bad day for FTC Solar, Inc. (NASDAQ:FTCI), 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) estimates were cut sharply as the analysts factored in the latest outlook for the business, concluding that they were too optimistic previously. Investors however, have been notably more optimistic about FTC Solar recently, with the stock price up an astounding 36% to US$2.58 in the past week. With such a sharp increase, it seems brokers may have seen something that is not yet being priced in by the wider market.

Following the downgrade, the current consensus from FTC Solar's eight analysts is for revenues of US$396m in 2023 which - if met - would reflect a major 100% increase on its sales over the past 12 months. The loss per share is anticipated to greatly reduce in the near future, narrowing 88% to US$0.12. Before this latest update, the analysts had been forecasting revenues of US$537m and earnings per share (EPS) of US$0.17 in 2023. There looks to have been a major change in sentiment regarding FTC Solar's prospects, with a sizeable cut to revenues and the analysts now forecasting a loss instead of a profit.

Check out the opportunities and risks within the US Electrical industry.

The consensus price target fell 25% to US$4.81, implicitly signalling that lower earnings per share are a leading indicator for FTC Solar's valuation. That's not the only conclusion we can draw from this data however, as some investors also like to consider the spread in estimates when evaluating analyst price targets. The most optimistic FTC Solar analyst has a price target of US$9.00 per share, while the most pessimistic values it at US$2.00. As you can see the range of estimates is wide, with the lowest valuation coming in at less than half the most bullish estimate, suggesting there are some strongly diverging views on how think this business will perform. With this in mind, we wouldn't rely too heavily on the consensus price target, as it is just an average and analysts clearly have some deeply divergent views on the business.

Taking a look at the bigger picture now, one of the ways we can understand these forecasts is to see how they compare to both past performance and industry growth estimates. The analysts are definitely expecting FTC Solar's growth to accelerate, with the forecast 74% annualised growth to the end of 2023 ranking favourably alongside historical growth of 28% per annum over the past three years. Compare this with other companies in the same industry, which are forecast to grow their revenue 9.7% annually. It seems obvious that, while the growth outlook is brighter than the recent past, the analysts also expect FTC Solar to grow faster than the wider industry.

The Bottom Line

The most important thing to take away is that analysts are expecting FTC Solar to become unprofitable next year. While analysts did downgrade their revenue estimates, these forecasts still imply revenues will perform better than the wider market. After such a stark change in sentiment from analysts, we'd understand if readers now felt a bit wary of FTC Solar.

Still, the long-term prospects of the business are much more relevant than next year's earnings. At Simply Wall St, we have a full range of analyst estimates for FTC Solar going out to 2024, and you can see them 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.