Time To Worry? Analysts Just Downgraded Their 22nd Century Group, Inc. (NASDAQ:XXII) Outlook

The analysts covering 22nd Century Group, Inc. (NASDAQ:XXII) delivered a dose of negativity to shareholders today, by making a substantial revision to their statutory forecasts for this year. Revenue estimates were cut sharply as analysts signalled a weaker outlook - perhaps a sign that investors should temper their expectations as well.

Following the downgrade, the most recent consensus for 22nd Century Group from its four analysts is for revenues of US$94m in 2023 which, if met, would be a meaningful 12% increase on its sales over the past 12 months. Per-share losses are expected to see a sharp uptick, reaching US$4.36. Yet prior to the latest estimates, the analysts had been forecasting revenues of US$106m and losses of US$4.20 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.

See our latest analysis for 22nd Century Group

The consensus price target fell 27% to US$31.19, implicitly signalling that lower earnings per share are a leading indicator for 22nd Century Group's valuation.

Of course, another way to look at these forecasts is to place them into context against the industry itself. We can infer from the latest estimates that forecasts expect a continuation of 22nd Century Group'shistorical trends, as the 26% annualised revenue growth to the end of 2023 is roughly in line with the 24% annual revenue growth over the past five years. By contrast, our data suggests that other companies (with analyst coverage) in a similar industry are forecast to see their revenues grow 4.3% per year. So it's pretty clear that 22nd Century Group is forecast to grow substantially faster than its industry.

The Bottom Line

The most important thing to take away is that analysts increased their loss per share estimates for this year. 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. Overall, given the drastic downgrade to this year's forecasts, we'd be feeling a little more wary of 22nd Century Group going forwards.

As you can see, the analysts clearly aren't bullish, and there might be good reason for that. We've identified some potential issues with 22nd Century Group's financials, such as dilutive stock issuance over the past year. Learn more, and discover the 3 other warning signs 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.

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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.