Some RLX Technology Inc. (NYSE:RLX) Analysts Just Made A Major Cut To Next Year's Estimates

The latest analyst coverage could presage a bad day for RLX Technology Inc. (NYSE:RLX), with the analysts making across-the-board cuts to their statutory estimates that might leave shareholders a little shell-shocked. Both revenue and earnings per share (EPS) forecasts went under the knife, suggesting the analysts have soured majorly on the business.

After this downgrade, RLX Technology's four analysts are now forecasting revenues of CN¥9.5b in 2022. This would be a notable 12% improvement in sales compared to the last 12 months. Statutory earnings per share are supposed to plunge 43% to CN¥0.86 in the same period. Before this latest update, the analysts had been forecasting revenues of CN¥11b and earnings per share (EPS) of CN¥1.12 in 2022. Indeed, we can see that the analysts are a lot more bearish about RLX Technology's prospects, administering a measurable cut to revenue estimates and slashing their EPS estimates to boot.

See our latest analysis for RLX Technology

It'll come as no surprise then, to learn that the analysts have cut their price target 21% to CN¥48.32. 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 RLX Technology analyst has a price target of CN¥24.91 per share, while the most pessimistic values it at CN¥1.30. These price targets show that analysts do have some differing views on the business, but the estimates do not vary enough to suggest to us that some are betting on wild success or utter failure.

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. It's pretty clear that there is an expectation that RLX Technology's revenue growth will slow down substantially, with revenues to the end of 2022 expected to display 12% growth on an annualised basis. This is compared to a historical growth rate of 64% over the past three years. By way of comparison, the other companies in this industry with analyst coverage are forecast to grow their revenue at 3.9% 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 to take away is that analysts cut their earnings per share estimates, expecting a clear decline in business conditions. Unfortunately, analysts also downgraded their revenue estimates, although our data indicates revenues are expected to perform better 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.

With that said, the long-term trajectory of the company's earnings is a lot more important than next year. At Simply Wall St, we have a full range of analyst estimates for RLX Technology going out to 2024, and you can see them 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.