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

One thing we could say about the analysts on RLX Technology Inc. (NYSE:RLX) - they aren't optimistic, having just made a major negative revision to their near-term (statutory) forecasts for the organization. Revenue estimates were cut sharply as analysts signalled a weaker outlook - perhaps a sign that investors should temper their expectations as well.

Following the latest downgrade, the four analysts covering RLX Technology provided consensus estimates of CN¥1.6b revenue in 2023, which would reflect a discernible 7.0% decline on its sales over the past 12 months. Before the latest update, the analysts were foreseeing CN¥2.2b of revenue in 2023. It looks like forecasts have become a fair bit less optimistic on RLX Technology, given the sizeable cut to revenue estimates.

Check out our latest analysis for RLX Technology

Notably, the analysts have cut their price target 21% to CN¥19.77, suggesting concerns around RLX Technology's 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. Currently, the most bullish analyst values RLX Technology at CN¥29.11 per share, while the most bearish prices it at CN¥15.29. 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 RLX Technology's past performance and to peers in the same industry. Over the past three years, revenues have declined around 5.2% annually. Worse, forecasts are essentially predicting the decline to accelerate, with the estimate for an annualised 14% decline in revenue until the end of 2023. Compare this against analyst estimates for companies in the broader industry, which suggest that revenues (in aggregate) are expected to grow 4.4% annually. So while a broad number of companies are forecast to grow, unfortunately RLX Technology is expected to see its sales affected worse than other companies in the industry.

The Bottom Line

The clear low-light was that analysts slashing their revenue forecasts for RLX Technology this year. They also expect company revenue to perform worse than the wider market. The consensus price target fell measurably, with analysts seemingly not reassured by recent business developments, leading to a lower estimate of RLX Technology's future valuation. 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.

So things certainly aren't looking great, and you should also know that we've spotted some potential warning signs with RLX Technology, including its declining profit margins. For more information, you can click here to discover this and the 1 other concern we've identified.

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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.