Time To Worry? Analysts Are Downgrading Their Hydrofarm Holdings Group, Inc. (NASDAQ:HYFM) Outlook

One thing we could say about the analysts on Hydrofarm Holdings Group, Inc. (NASDAQ:HYFM) - 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) forecasts went under the knife, suggesting the analysts have soured majorly on the business.

Following the downgrade, the consensus from three analysts covering Hydrofarm Holdings Group is for revenues of US$236m in 2023, implying a definite 9.5% decline in sales compared to the last 12 months. The loss per share is anticipated to greatly reduce in the near future, narrowing 55% to US$0.88. However, before this estimates update, the consensus had been expecting revenues of US$280m and US$0.74 per share in losses. 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.

View our latest analysis for Hydrofarm Holdings Group

The consensus price target fell 21% to US$1.18, implicitly signalling that lower earnings per share are a leading indicator for Hydrofarm Holdings Group's valuation.

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. Over the past three years, revenues have declined around 0.3% annually. Worse, forecasts are essentially predicting the decline to accelerate, with the estimate for an annualised 18% decline in revenue until the end of 2023. Compare this against analyst estimates for companies in the broader industry, which suggest that revenues (in aggregate) are expected to grow 4.1% annually. So it's pretty clear that, while it does have declining revenues, the analysts also expect Hydrofarm Holdings Group to suffer 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 Hydrofarm Holdings Group. Unfortunately analysts also downgraded their revenue estimates, and industry data suggests that Hydrofarm Holdings Group's revenues are expected to grow slower than the wider market. After such a stark change in sentiment from analysts, we'd understand if readers now felt a bit wary of Hydrofarm Holdings Group.

Even so, the longer term trajectory of the business is much more important for the value creation of shareholders. We have estimates - from multiple Hydrofarm Holdings Group analysts - going out to 2025, 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.

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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.