Analysts Just Made A Major Revision To Their Zhihu Inc. (NYSE:ZH) Revenue Forecasts

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

After the downgrade, the twelve analysts covering Zhihu are now predicting revenues of CN¥4.0b in 2022. If met, this would reflect a major 24% improvement in sales compared to the last 12 months. Prior to the latest estimates, the analysts were forecasting revenues of CN¥4.7b in 2022. It looks like forecasts have become a fair bit less optimistic on Zhihu, given the substantial drop in revenue estimates.

See our latest analysis for Zhihu

We'd point out that there was no major changes to their price target of CN¥27.26, suggesting the latest estimates were not enough to shift their view on the value of the business. 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 Zhihu, with the most bullish analyst valuing it at CN¥6.38 and the most bearish at CN¥1.50 per share. The narrow spread of estimates could suggest that the business' future is relatively easy to value, or that the analysts have a clear view on its prospects.

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. We would highlight that Zhihu's revenue growth is expected to slow, with the forecast 34% annualised growth rate until the end of 2022 being well below the historical 96% growth over the last year. By way of comparison, the other companies in this industry with analyst coverage are forecast to grow their revenue at 17% annually. So it's pretty clear that, while Zhihu's revenue growth is expected to slow, it's still expected to grow faster than the industry itself.

The Bottom Line

The most important thing to take away is that analysts cut their revenue estimates for this year. Analysts also expect revenues to grow faster than the wider market. Overall, given the drastic downgrade to this year's forecasts, we'd be feeling a little more wary of Zhihu going forwards.

Still got questions? At least one of Zhihu's twelve analysts has provided estimates out to 2024, which can be seen for 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.