Newsflash: Desktop Metal, Inc. (NYSE:DM) Analysts Have Been Trimming Their Revenue Forecasts

Market forces rained on the parade of Desktop Metal, Inc. (NYSE:DM) shareholders today, when the analysts downgraded their forecasts for next year. This report focused on revenue estimates, and it looks as though the consensus view of the business has become substantially more conservative.

After this downgrade, Desktop Metal's four analysts are now forecasting revenues of US$238m in 2023. This would be a notable 16% improvement in sales compared to the last 12 months. The loss per share is anticipated to greatly reduce in the near future, narrowing 78% to US$0.35. Yet prior to the latest estimates, the analysts had been forecasting revenues of US$332m and losses of US$0.34 per share in 2023. So there's definitely been a change in sentiment in this update, with the analysts administering a substantial haircut to next year's revenue estimates, while at the same time holding losses per share steady.

View our latest analysis for Desktop Metal

The consensus price target fell 15% to US$3.21, with the analysts clearly concerned about the weaker revenue outlook and expectation of ongoing losses. 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 Desktop Metal analyst has a price target of US$5.00 per share, while the most pessimistic values it at US$1.75. We would probably assign less value to the forecasts in this situation, because such a wide range of estimates could imply that the future of this business is difficult to value accurately. 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.

Another way we can view these estimates is in the context of the bigger picture, such as how the forecasts stack up against past performance, and whether forecasts are more or less bullish relative to other companies in the industry. We would highlight that Desktop Metal's revenue growth is expected to slow, with the forecast 13% annualised growth rate until the end of 2023 being well below the historical 95% p.a. growth over the last three years. By way of comparison, the other companies in this industry with analyst coverage are forecast to grow their revenue at 5.2% annually. So it's pretty clear that, while Desktop Metal's revenue growth is expected to slow, it's still expected to grow faster than the industry itself.

The Bottom Line

While analysts did downgrade their revenue estimates, these forecasts still imply revenues will perform better than the wider market. Furthermore, there was a cut to the price target, suggesting that the latest news has led to more pessimism about the intrinsic value of the business. Often, one downgrade can set off a daisy-chain of cuts, especially if an industry is in decline. So we wouldn't be surprised if the market became a lot more cautious on Desktop Metal after today.

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 Desktop Metal analysts - going out to 2024, 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.