These Analysts Just Made A Significant Downgrade To Their AppHarvest, Inc. (NASDAQ:APPH) EPS Forecasts

The analysts covering AppHarvest, Inc. (NASDAQ:APPH) delivered a dose of negativity to shareholders today, by making a substantial revision to their statutory forecasts for this year. Both revenue and earnings per share (EPS) estimates were cut sharply as analysts factored in the latest outlook for the business, concluding that they were too optimistic previously.

Following the downgrade, the latest consensus from AppHarvest's twin analysts is for revenues of US$21m in 2022, which would reflect a huge 57% improvement in sales compared to the last 12 months. Losses are expected to be contained, narrowing 16% from last year to US$1.32. However, before this estimates update, the consensus had been expecting revenues of US$27m and US$1.16 per share in losses. 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 AppHarvest

The consensus price target was broadly unchanged at US$6.50, perhaps implicitly signalling that the weaker earnings outlook is not expected to have a long-term impact on the valuation. There's another way to think about price targets though, and that's to look at the range of price targets put forward by analysts, because a wide range of estimates could suggest a diverse view on possible outcomes for the business. The most optimistic AppHarvest analyst has a price target of US$9.00 per share, while the most pessimistic values it at US$5.00. This is a fairly broad spread of estimates, suggesting that the analysts are forecasting a wide range of possible outcomes for the business.

These estimates are interesting, but it can be useful to paint some more broad strokes when seeing how forecasts compare, both to the AppHarvest's past performance and to peers in the same industry. The period to the end of 2022 brings more of the same, according to the analysts, with revenue forecast to display 146% growth on an annualised basis. That is in line with its 142% annual growth over the past year. Compare this with the broader industry, which analyst estimates (in aggregate) suggest will see revenues grow 2.5% annually. So it's pretty clear that AppHarvest is forecast to grow substantially faster than its 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 AppHarvest. Unfortunately, analysts also downgraded their revenue estimates, although our data indicates revenues are expected to perform better than the wider market. The lack of change in the price target is puzzling in light of the downgrade but, with a serious decline expected this year, we wouldn't be surprised if investors were a bit wary of AppHarvest.

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 AppHarvest's business, like a short cash runway. Learn more, and discover the 4 other warning signs we've identified, for 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.