Stem, Inc. (NYSE:STEM) Analysts Just Slashed Next Year's Estimates

One thing we could say about the analysts on Stem, Inc. (NYSE:STEM) - they aren't optimistic, having just made a major negative revision to their near-term (statutory) forecasts for the organization. Revenue and earnings per share (EPS) forecasts were both revised downwards, with analysts seeing grey clouds on the horizon.

After the downgrade, the twelve analysts covering Stem are now predicting revenues of US$465m in 2025. If met, this would reflect a sizeable 81% improvement in sales compared to the last 12 months. Losses are predicted to fall substantially, shrinking 88% to US$0.62 per share. Yet before this consensus update, the analysts had been forecasting revenues of US$551m and losses of US$0.56 per share in 2025. 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.

See our latest analysis for Stem

There was no major change to the consensus price target of US$2.07, signalling that the business is performing roughly in line with expectations, despite lower earnings per share forecasts.

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 Stem's growth to accelerate, with the forecast 61% annualised growth to the end of 2025 ranking favourably alongside historical growth of 45% per annum over the past five years. Compare this with other companies in the same industry, which are forecast to grow their revenue 8.4% annually. Factoring in the forecast acceleration in revenue, it's pretty clear that Stem is expected to grow much faster than its industry.

The Bottom Line

The most important thing to note from this downgrade is that the consensus increased its forecast losses next year, suggesting all may not be well at Stem. Unfortunately, analysts also downgraded their revenue estimates, although our data indicates revenues are expected to perform better than the wider market. We're also surprised to see that the price target went unchanged. Still, deteriorating business conditions (assuming accurate forecasts!) can be a leading indicator for the stock price, so we wouldn't blame investors for being more cautious on Stem after the downgrade.

After a downgrade like this, it's pretty clear that previous forecasts were too optimistic. What's more, we've spotted several possible issues with Stem's business, like dilutive stock issuance over the past year. For more information, you can click here to discover this and the 3 other risks we've identified.

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 with high insider ownership.

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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.