What You Need To Know About The Hydrofarm Holdings Group, Inc. (NASDAQ:HYFM) Analyst Downgrade Today

Today is shaping up negative for Hydrofarm Holdings Group, Inc. (NASDAQ:HYFM) shareholders, with the analysts delivering a substantial negative revision to this year's forecasts. There was a fairly draconian cut to their revenue estimates, perhaps an implicit admission that previous forecasts were much too optimistic.

Following the latest downgrade, the seven analysts covering Hydrofarm Holdings Group provided consensus estimates of US$395m revenue in 2022, which would reflect an uncomfortable 18% decline on its sales over the past 12 months. Before the latest update, the analysts were foreseeing US$482m of revenue in 2022. The consensus view seems to have become more pessimistic on Hydrofarm Holdings Group, noting the substantial drop in revenue estimates in this update.

See our latest analysis for Hydrofarm Holdings Group

The consensus price target fell 11% to US$8.75, with the analysts clearly less optimistic about Hydrofarm Holdings Group's valuation following this update. The consensus price target is just an average of individual analyst targets, so - it could be handy to see how wide the range of underlying estimates is. The most optimistic Hydrofarm Holdings Group analyst has a price target of US$18.00 per share, while the most pessimistic values it at US$4.00. 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. As a result it might not be possible to derive much meaning from the consensus price target, which is after all just an average of this wide range of estimates.

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. We would highlight that sales are expected to reverse, with a forecast 23% annualised revenue decline to the end of 2022. That is a notable change from historical growth of 24% over the last year. By contrast, our data suggests that other companies (with analyst coverage) in the same industry are forecast to see their revenue grow 5.8% annually for the foreseeable future. So although its revenues are forecast to shrink, this cloud does not come with a silver lining - Hydrofarm Holdings Group is expected to lag the wider industry.

The Bottom Line

The most important thing to take away is that analysts cut their revenue estimates for this year. They're also anticipating slower revenue growth than the wider market. The consensus price target fell measurably, with analysts seemingly not reassured by recent business developments, leading to a lower estimate of Hydrofarm Holdings Group's future valuation. Given the stark change in sentiment, we'd understand if investors became more cautious on Hydrofarm Holdings Group after today.

Hungry for more information? We have estimates for Hydrofarm Holdings Group from its seven analysts out until 2024, and you can see them free on our platform here.

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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.