Things Look Grim For Aterian, Inc. (NASDAQ:ATER) After Today's Downgrade

One thing we could say about the analysts on Aterian, Inc. (NASDAQ:ATER) - 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) estimates were cut sharply as the analysts factored in the latest outlook for the business, concluding that they were too optimistic previously. The stock price has risen 9.4% to US$0.44 over the past week. It will be interesting to see if this downgrade motivates investors to start selling their holdings.

Following the downgrade, the consensus from four analysts covering Aterian is for revenues of US$137m in 2023, implying a concerning 28% decline in sales compared to the last 12 months. Losses are predicted to fall substantially, shrinking 61% to US$1.02 per share. Yet prior to the latest estimates, the analysts had been forecasting revenues of US$155m and losses of US$0.69 per share in 2023. 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.

Check out our latest analysis for Aterian

The consensus price target fell 40% to US$0.75, with the analysts clearly concerned about the company following the weaker revenue and earnings outlook.

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. These estimates imply that sales are expected to slow, with a forecast annualised revenue decline of 48% by the end of 2023. This indicates a significant reduction from annual growth of 7.4% over the last three years. Compare this with our data, which suggests that other companies in the same industry are, in aggregate, expected to see their revenue grow 2.9% per year. So although its revenues are forecast to shrink, this cloud does not come with a silver lining - Aterian is expected to lag the wider industry.

The Bottom Line

The most important thing to take away is that analysts increased their loss per share estimates for this year. Regrettably, they also downgraded their revenue estimates, and the latest forecasts imply the business will grow sales slower than the wider market. Given the scope of the downgrades, it would not be a surprise to see the market become more wary of the business.

There might be good reason for analyst bearishness towards Aterian, like dilutive stock issuance over the past year. Learn more, and discover the 4 other risks we've identified, for 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.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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.