News Flash: 10 Analysts Think MP Materials Corp. (NYSE:MP) Earnings Are Under Threat

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. Revenue and earnings per share (EPS) forecasts were both revised downwards, with the analysts seeing grey clouds on the horizon. At US$22.58, shares are up 9.7% in the past 7 days. We'd be curious to see if the downgrade is enough to reverse investor sentiment on the business.

Following the latest downgrade, the ten analysts covering MP Materials provided consensus estimates of US$328m revenue in 2023, which would reflect a substantial 28% decline on its sales over the past 12 months. Statutory earnings per share are supposed to nosedive 75% to US$0.35 in the same period. Previously, the analysts had been modelling revenues of US$443m and earnings per share (EPS) of US$0.95 in 2023. It looks like analyst sentiment has declined substantially, with a pretty serious reduction to revenue estimates and a pretty serious decline to earnings per share numbers as well.

View our latest analysis for MP Materials

The consensus price target fell 5.6% to US$37.00, with the weaker earnings outlook clearly leading analyst valuation estimates. There's another way to think about price targets though, and that's to look at the range of price targets put forward by analysts, because a wide range of estimates could suggest a diverse view on possible outcomes for the business. There are some variant perceptions on MP Materials, with the most bullish analyst valuing it at US$56.00 and the most bearish at US$26.00 per share. Note the wide gap in analyst price targets? This implies to us that there is a fairly broad range of possible scenarios for the underlying business.

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. These estimates imply that sales are expected to slow, with a forecast annualised revenue decline of 36% by the end of 2023. This indicates a significant reduction from annual growth of 58% over the last three years. By contrast, our data suggests that other companies (with analyst coverage) in the same industry are forecast to see their revenue grow 1.6% annually for the foreseeable future. So although its revenues are forecast to shrink, this cloud does not come with a silver lining - MP Materials is expected to lag 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. Unfortunately analysts also downgraded their revenue estimates, and industry data suggests that MP Materials' revenues are expected to grow slower than the wider market. After such a stark change in sentiment from analysts, we'd understand if readers now felt a bit wary of MP Materials.

Even so, the longer term trajectory of the business is much more important for the value creation of shareholders. At Simply Wall St, we have a full range of analyst estimates for MP Materials going out to 2025, and you can see them free on our platform here.

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 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.