Stock Analysis

The RLX Technology Inc. (NYSE:RLX) Analysts Have Been Trimming Their Sales Forecasts

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NYSE:RLX
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The analysts covering RLX Technology Inc. (NYSE:RLX) 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. Surprisingly the share price has been buoyant, rising 19% to US$2.61 in the past 7 days. With such a sharp increase, it seems brokers may have seen something that is not yet being priced in by the wider market.

After the downgrade, the consensus from RLX Technology's dual analysts is for revenues of CN¥3.4b in 2023, which would reflect a disturbing 36% decline in sales compared to the last year of performance. Before the latest update, the analysts were foreseeing CN¥4.2b of revenue in 2023. The consensus view seems to have become more pessimistic on RLX Technology, noting the measurable cut to revenue estimates in this update.

Check out our latest analysis for RLX Technology

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NYSE:RLX Earnings and Revenue Growth March 16th 2023

There was no particular change to the consensus price target of CN¥43.15, with RLX Technology's latest outlook seemingly not enough to result in a change of valuation. Fixating on a single price target can be unwise though, since the consensus target is effectively the average of analyst price targets. As a result, some investors like to look at the range of estimates to see if there are any diverging opinions on the company's valuation. The most optimistic RLX Technology analyst has a price target of CN¥9.46 per share, while the most pessimistic values it at CN¥3.15. Still, with such a tight range of estimates, it suggests the analysts have a pretty good idea of what they think the company is worth.

Looking at the bigger picture now, one of the ways we can make sense of these forecasts is to see how they measure up against both past performance and industry growth estimates. These estimates imply that sales are expected to slow, with a forecast annualised revenue decline of 36% by the end of 2023. This indicates a significant reduction from annual growth of 30% 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 3.8% per year. It's pretty clear that RLX Technology's revenues are expected to perform substantially worse than the wider industry.

The Bottom Line

The clear low-light was that analysts slashing their revenue forecasts for RLX Technology this year. They're also anticipating slower revenue growth than the wider market. Often, one downgrade can set off a daisy-chain of cuts, especially if an industry is in decline. So we wouldn't be surprised if the market became a lot more cautious on RLX Technology after today.

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 RLX Technology's financials, such as concerns around earnings quality. Learn more, and discover the 1 other flag 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.

What are the risks and opportunities for RLX Technology?

RLX Technology Inc., together with its subsidiaries, researchers, develops, manufactures, distributes, and sells e-vapor products in the People's Republic of China.

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Rewards

  • Trading at 50% below our estimate of its fair value

  • Earnings are forecast to grow 8.43% per year

Risks

  • High level of non-cash earnings

  • Volatile share price over the past 3 months

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