Neuronetics, Inc. (NASDAQ:STIM) Analysts Just Slashed Next Year's Revenue Estimates By 12%

Market forces rained on the parade of Neuronetics, Inc. (NASDAQ:STIM) shareholders today, when the analysts downgraded their forecasts for next year. There was a fairly draconian cut to their revenue estimates, perhaps an implicit admission that previous forecasts were much too optimistic.

Following the downgrade, the latest consensus from Neuronetics' four analysts is for revenues of US$77m in 2025, which would reflect a satisfactory 5.9% improvement in sales compared to the last 12 months. Losses are predicted to fall substantially, shrinking 44% to US$0.67 per share. However, before this estimates update, the consensus had been expecting revenues of US$87m and US$0.63 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.

Check out our latest analysis for Neuronetics

The consensus price target fell 20% to US$2.67, implicitly signalling that lower earnings per share are a leading indicator for Neuronetics' valuation.

One way to get more context on these forecasts is to look at how they compare to both past performance, and how other companies in the same industry are performing. We would highlight that Neuronetics' revenue growth is expected to slow, with the forecast 4.7% annualised growth rate until the end of 2025 being well below the historical 6.2% p.a. growth over the last five years. By way of comparison, the other companies in this industry with analyst coverage are forecast to grow their revenue at 8.2% per year. Factoring in the forecast slowdown in growth, it seems obvious that Neuronetics is also expected to grow slower than other industry participants.

The Bottom Line

The most important thing to take away is that analysts increased their loss per share estimates for next year. Unfortunately analysts also downgraded their revenue estimates, and industry data suggests that Neuronetics' revenues are expected to grow 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 Neuronetics' future valuation. Overall, given the drastic downgrade to next year's forecasts, we'd be feeling a little more wary of Neuronetics going forwards.

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 Neuronetics' financials, such as a short cash runway. 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 with high insider ownership.

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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.