Things Look Grim For Sema4 Holdings Corp. (NASDAQ:SMFR) After Today's Downgrade

Market forces rained on the parade of Sema4 Holdings Corp. (NASDAQ:SMFR) shareholders today, when the analysts downgraded their forecasts for this year. Both revenue and earnings per share (EPS) forecasts went under the knife, suggesting the analysts have soured majorly on the business.

Following the downgrade, the latest consensus from Sema4 Holdings' four analysts is for revenues of US$242m in 2022, which would reflect a substantial 27% improvement in sales compared to the last 12 months. Per-share losses are expected to explode, reaching US$1.12 per share. Yet prior to the latest estimates, the analysts had been forecasting revenues of US$306m and losses of US$0.97 per share in 2022. 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 Sema4 Holdings

The consensus price target fell 24% to US$3.25, implicitly signalling that lower earnings per share are a leading indicator for Sema4 Holdings' 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. There are some variant perceptions on Sema4 Holdings, with the most bullish analyst valuing it at US$5.00 and the most bearish at US$2.00 per share. 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. For example, we noticed that Sema4 Holdings' rate of growth is expected to accelerate meaningfully, with revenues forecast to exhibit 60% growth to the end of 2022 on an annualised basis. That is well above its historical decline of 11% a year over the past year. By contrast, our data suggests that other companies (with analyst coverage) in the industry are forecast to see their revenue grow 7.1% per year. So it looks like Sema4 Holdings is expected to grow faster than its competitors, at least for a while.

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 Sema4 Holdings. Unfortunately, analysts also downgraded their revenue estimates, although our data indicates revenues are expected to perform better than the wider market. Given the scope of the downgrades, it would not be a surprise to see the market become more wary of the business.

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 Sema4 Holdings' financials, such as a short cash runway. Learn more, and discover the 1 other warning sign 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.

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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.