Some Analysts Just Cut Their Li-Cycle Holdings Corp. (NYSE:LICY) Estimates

Market forces rained on the parade of Li-Cycle Holdings Corp. (NYSE:LICY) shareholders today, when the analysts downgraded their forecasts for this year. 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 four analysts covering Li-Cycle Holdings provided consensus estimates of US$29m revenue in 2023, which would reflect a small 6.5% decline on its sales over the past 12 months. Per-share losses are expected to explode, reaching US$0.72 per share. Yet before this consensus update, the analysts had been forecasting revenues of US$36m and losses of US$0.66 per share in 2023. Ergo, there's been a clear change in sentiment, with the analysts administering a notable cut to this year's revenue estimates, while at the same time increasing their loss per share forecasts.

Check out our latest analysis for Li-Cycle Holdings

There was no major change to the consensus price target of US$7.81, signalling that the business is performing roughly in line with expectations, despite lower earnings per share forecasts. Fixating on a single price target can be unwise though, since the consensus target is effectively the average of analyst price targets. As a result, some investors like to look at the range of estimates to see if there are any diverging opinions on the company's valuation. There are some variant perceptions on Li-Cycle Holdings, with the most bullish analyst valuing it at US$10.00 and the most bearish at US$4.00 per share. This is a fairly broad spread of estimates, suggesting that the analysts are forecasting a wide range of possible outcomes for the business.

Looking at the bigger picture now, one of the ways we can make sense of these forecasts is to see how they measure up against both past performance and industry growth estimates. These estimates imply that sales are expected to slow, with a forecast annualised revenue decline of 8.6% by the end of 2023. This indicates a significant reduction from annual growth of 97% over the last year. Compare this with our data, which suggests that other companies in the same industry are, in aggregate, expected to see their revenue grow 7.7% per year. So although its revenues are forecast to shrink, this cloud does not come with a silver lining - Li-Cycle Holdings is expected to lag 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 Li-Cycle Holdings. Regrettably, they also downgraded their revenue estimates, and the latest forecasts imply the business will grow sales slower than the wider market. Given the stark change in sentiment, we'd understand if investors became more cautious on Li-Cycle Holdings after today.

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