Analysts Just Shaved Their MP Materials Corp. (NYSE:MP) Forecasts Dramatically

The latest analyst coverage could presage a bad day for MP Materials Corp. (NYSE:MP), with the analysts making across-the-board cuts to their statutory estimates that might leave shareholders a little shell-shocked. Both revenue and earnings per share (EPS) estimates were cut sharply as the analysts factored in the latest outlook for the business, concluding that they were too optimistic previously.

Following the downgrade, the consensus from seven analysts covering MP Materials is for revenues of US$439m in 2023, implying an uneasy 17% decline in sales compared to the last 12 months. Statutory earnings per share are supposed to crater 46% to US$0.88 in the same period. Previously, the analysts had been modelling revenues of US$510m and earnings per share (EPS) of US$1.22 in 2023. Indeed, we can see that the analysts are a lot more bearish about MP Materials' prospects, administering a substantial drop in revenue estimates and slashing their EPS estimates to boot.

Check out our latest analysis for MP Materials

Despite the cuts to forecast earnings, there was no real change to the US$44.41 price target, showing that the analysts don't think the changes have a meaningful impact on its intrinsic value. The consensus price target is just an average of individual analyst targets, so - it could be handy to see how wide the range of underlying estimates is. Currently, the most bullish analyst values MP Materials at US$56.00 per share, while the most bearish prices it at US$34.00. 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 MP Materials shareholders.

Looking at the bigger picture now, one of the ways we can make sense of these forecasts is to see how they measure up against both past performance and industry growth estimates. We would highlight that sales are expected to reverse, with a forecast 17% annualised revenue decline to the end of 2023. That is a notable change from historical growth of 66% 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 0.5% per year. It's pretty clear that MP Materials' revenues are expected to perform substantially worse than the wider industry.

The Bottom Line

The most important thing to take away is that analysts cut their earnings per share estimates, expecting a clear decline in business conditions. Regrettably, they also downgraded their revenue estimates, and the latest forecasts imply the business will grow sales slower than the wider market. We're also surprised to see that the price target went unchanged. Still, deteriorating business conditions (assuming accurate forecasts!) can be a leading indicator for the stock price, so we wouldn't blame investors for being more cautious on MP Materials after the downgrade.

Still, the long-term prospects of the business are much more relevant than next year's earnings. We have estimates - from multiple MP Materials analysts - going out to 2025, and you can see them 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.