Cue Health Inc. (NASDAQ:HLTH) Analysts Just Slashed This Year's Revenue Estimates By 56%

The latest analyst coverage could presage a bad day for Cue Health Inc. (NASDAQ:HLTH), with the analysts making across-the-board cuts to their statutory estimates that might leave shareholders a little shell-shocked. Revenue estimates were cut sharply as the analysts signalled a weaker outlook - perhaps a sign that investors should temper their expectations as well. The stock price has risen 9.2% to US$2.19 over the past week. We'd be curious to see if the downgrade is enough to reverse investor sentiment on the business.

Following the latest downgrade, the current consensus, from the four analysts covering Cue Health, is for revenues of US$115m in 2023, which would reflect a disturbing 76% reduction in Cue Health's sales over the past 12 months. Losses are supposed to balloon 58% to US$2.03 per share. However, before this estimates update, the consensus had been expecting revenues of US$262m and US$1.96 per share in losses. So there's been quite a change-up of views after the recent consensus updates, with the analysts making a serious cut to their revenue forecasts while also expecting losses per share to increase.

View our latest analysis for Cue Health

The consensus price target fell 14% to US$5.38, implicitly signalling that lower earnings per share are a leading indicator for Cue Health's valuation. 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 Cue Health analyst has a price target of US$8.00 per share, while the most pessimistic values it at US$3.50. This is a fairly broad spread of estimates, suggesting that the analysts are forecasting a wide range of possible outcomes for the business.

Another way we can view these estimates is in the context of the bigger picture, such as how the forecasts stack up against past performance, and whether forecasts are more or less bullish relative to other companies in the industry. These estimates imply that sales are expected to slow, with a forecast annualised revenue decline of 76% by the end of 2023. This indicates a significant reduction from annual growth of 66% over the last three years. By contrast, our data suggests that other companies (with analyst coverage) in the same industry are forecast to see their revenue grow 7.5% annually for the foreseeable future. It's pretty clear that Cue Health's revenues are expected to perform substantially worse than the wider industry.

The Bottom Line

The most important thing to note from this downgrade is that the consensus increased its forecast losses this year, suggesting all may not be well at Cue Health. Regrettably, they also downgraded their revenue estimates, and the latest forecasts imply the business will grow sales slower 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 Cue Health's future valuation. Overall, given the drastic downgrade to this year's forecasts, we'd be feeling a little more wary of Cue Health going forwards.

So things certainly aren't looking great, and you should also know that we've spotted some potential warning signs with Cue Health, including dilutive stock issuance over the past year. For more information, you can click here to discover this and the 3 other flags we've identified.

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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