One thing we could say about the analysts on MP Materials Corp. (NYSE:MP) - they aren't optimistic, having just made a major negative revision to their near-term (statutory) forecasts for the organization. This report focused on revenue estimates, and it looks as though the consensus view of the business has become substantially more conservative.
After the downgrade, the three analysts covering MP Materials are now predicting revenues of US$187m in 2021. If met, this would reflect a huge 39% improvement in sales compared to the last 12 months. Before the latest update, the analysts were foreseeing US$212m of revenue in 2021. The consensus view seems to have become more pessimistic on MP Materials, noting the substantial drop in revenue estimates in this update.
The consensus price target rose 12% to US$47.50, with the analysts clearly more optimistic about MP Materials' prospects following this update. 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 MP Materials, with the most bullish analyst valuing it at US$57.00 and the most bearish at US$37.00 per share. 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 MP Materials shareholders.
Of course, another way to look at these forecasts is to place them into context against the industry itself. It's pretty clear that there is an expectation that MP Materials' revenue growth will slow down substantially, with revenues to the end of 2021 expected to display 39% growth on an annualised basis. This is compared to a historical growth rate of 83% over the past year. By way of comparison, the other companies in this industry with analyst coverage are forecast to grow their revenue at 5.8% annually. Even after the forecast slowdown in growth, it seems obvious that MP Materials is also expected to grow faster than the wider industry.
The Bottom Line
The clear low-light was that analysts slashing their revenue forecasts for MP Materials this year. Analysts also expect revenues to grow faster than the wider market. There was also an increase in the price target, suggesting that there is more optimism baked into the forecasts than there was previously. Given the stark change in sentiment, we'd understand if investors became more cautious on MP Materials after today.
So things certainly aren't looking great, and you should also know that we've spotted some potential warning signs with MP Materials, including a short cash runway. Learn more, and discover the 1 other flag we've identified, for free on our platform here.
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What are the risks and opportunities for MP Materials?
Trading at 53.4% below our estimate of its fair value
Earnings are forecast to grow 12.77% per year
Earnings grew by 146% over the past year
High level of non-cash earnings
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