Cue Health Inc. (NASDAQ:HLTH) Analysts Just Trimmed Their Revenue Forecasts By 24%

Market forces rained on the parade of Cue Health Inc. (NASDAQ:HLTH) shareholders today, when the analysts downgraded their forecasts for next year. This report focused on revenue estimates, and it looks as though the consensus view of the business has become substantially more conservative.

Following the downgrade, the consensus from four analysts covering Cue Health is for revenues of US$281m in 2023, implying a substantial 47% decline in sales compared to the last 12 months. Losses are supposed to balloon 61% to US$1.49 per share. Yet before this consensus update, the analysts had been forecasting revenues of US$367m and losses of US$1.22 per share in 2023. Ergo, there's been a clear change in sentiment, with the analysts administering a notable cut to next year's revenue estimates, while at the same time increasing their loss per share forecasts.

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The consensus price target fell 19% to US$6.50, implicitly signalling that lower earnings per share are a leading indicator for Cue Health's valuation. 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. The most optimistic Cue Health analyst has a price target of US$8.00 per share, while the most pessimistic values it at US$4.00. This is a fairly broad spread of estimates, suggesting that the analysts are forecasting a wide range of possible outcomes for the business.

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 sales are expected to reverse, with a forecast 40% annualised revenue decline to the end of 2023. That is a notable change from historical growth of 80% 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 7.4% per year. So although its revenues are forecast to shrink, this cloud does not come with a silver lining - Cue Health is expected to lag the wider industry.

The Bottom Line

The most important thing to take away is that analysts increased their loss per share estimates for next year. 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. Given the stark change in sentiment, we'd understand if investors became more cautious on Cue Health after today.

Even so, the longer term trajectory of the business is much more important for the value creation of shareholders. At Simply Wall St, we have a full range of analyst estimates for Cue Health going out to 2024, and you can see them free on our platform here.

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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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.