RLX Technology Inc. (NYSE:RLX) Just Reported Earnings, And Analysts Cut Their Target Price

There's been a major selloff in RLX Technology Inc. (NYSE:RLX) shares in the week since it released its half-year report, with the stock down 28% to US$3.66. The result was fairly weak overall, with revenues of CN¥4.9b being 5.9% less than what the analysts had been modelling. Earnings are an important time for investors, as they can track a company's performance, look at what the analysts are forecasting for next year, and see if there's been a change in sentiment towards the company. With this in mind, we've gathered the latest statutory forecasts to see what the analysts are expecting for next year.

View our latest analysis for RLX Technology

Following the latest results, RLX Technology's four analysts are now forecasting revenues of CN¥9.57b in 2021. This would be a notable 16% improvement in sales compared to the last 12 months. Per-share earnings are expected to jump 62% to CN¥1.55. Before this earnings report, the analysts had been forecasting revenues of CN¥9.62b and earnings per share (EPS) of CN¥1.44 in 2021. The analysts seems to have become more bullish on the business, judging by their new earnings per share estimates.

The consensus price target fell 24% to US$12.73, suggesting the increase in earnings forecasts was not enough to offset other the analysts concerns. That's not the only conclusion we can draw from this data however, as some investors also like to consider the spread in estimates when evaluating analyst price targets. There are some variant perceptions on RLX Technology, with the most bullish analyst valuing it at US$30.00 and the most bearish at US$3.50 per share. There are definitely some different views on the stock, but the range of estimates is not wide enough as to imply that the situation is unforecastable, in our view.

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. We would highlight that RLX Technology's revenue growth is expected to slow, with the forecast 35% annualised growth rate until the end of 2021 being well below the historical 70% p.a. growth over the last three years. By way of comparison, the other companies in this industry with analyst coverage are forecast to grow their revenue at 7.3% annually. So it's pretty clear that, while RLX Technology's revenue growth is expected to slow, it's still expected to grow faster than the industry itself.

The Bottom Line

The most important thing here is that the analysts upgraded their earnings per share estimates, suggesting that there has been a clear increase in optimism towards RLX Technology following these results. Happily, there were no major changes to revenue forecasts, with the business still expected to grow faster than the wider industry. Furthermore, the analysts also cut their price targets, suggesting that the latest news has led to greater pessimism about the intrinsic value of the business.

Keeping that in mind, we still think that the longer term trajectory of the business is much more important for investors to consider. We have forecasts for RLX Technology going out to 2023, and you can see them free on our platform here.

However, before you get too enthused, we've discovered 1 warning sign for RLX Technology that you should be aware of.

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.