Newsflash: Ontrak, Inc. (NASDAQ:OTRK) Analysts Have Been Trimming Their Revenue Forecasts

One thing we could say about the analysts on Ontrak, Inc. (NASDAQ:OTRK) - they aren't optimistic, having just made a major negative revision to their near-term (statutory) forecasts for the organization. There was a fairly draconian cut to their revenue estimates, perhaps an implicit admission that previous forecasts were much too optimistic.

After the downgrade, the consensus from Ontrak's three analysts is for revenues of US$19m in 2022, which would reflect a disturbing 50% decline in sales compared to the last year of performance. Per-share losses are expected to see a sharp uptick, reaching US$3.05. Yet before this consensus update, the analysts had been forecasting revenues of US$25m and losses of US$2.85 per share in 2022. Ergo, there's been a clear change in sentiment, with the analysts administering a notable cut to this year's revenue estimates, while at the same time increasing their loss per share forecasts.

See our latest analysis for Ontrak

The consensus price target was broadly unchanged at US$2.33, perhaps implicitly signalling that the weaker earnings outlook is not expected to have a long-term impact on the 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. Currently, the most bullish analyst values Ontrak at US$3.00 per share, while the most bearish prices it at US$2.00. Analysts definitely have varying views on the business, but the spread of estimates is not wide enough in our view to suggest that extreme outcomes could await Ontrak shareholders.

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 75% annualised revenue decline to the end of 2022. That is a notable change from historical growth of 42% over the last five years. Compare this with our data, which suggests that other companies in the same industry are, in aggregate, expected to see their revenue grow 7.1% per year. It's pretty clear that Ontrak'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 Ontrak. Regrettably, they also downgraded their revenue estimates, and the latest forecasts imply the business will grow sales slower 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 Ontrak after today.

That said, the analysts might have good reason to be negative on Ontrak, given dilutive stock issuance over the past year. Learn more, and discover the 3 other concerns 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.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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.