News Flash: 8 Analysts Think Zhihu Inc. (NYSE:ZH) Earnings Are Under Threat

Today is shaping up negative for Zhihu Inc. (NYSE:ZH) shareholders, with the analysts delivering a substantial negative revision to this year's forecasts. Revenue and earnings per share (EPS) forecasts were both revised downwards, with analysts seeing grey clouds on the horizon.

After the downgrade, the consensus from Zhihu's eight analysts is for revenues of CN¥3.8b in 2024, which would reflect an uneasy 11% decline in sales compared to the last year of performance. Losses are predicted to fall substantially, shrinking 37% to CN¥0.90 per share. Yet before this consensus update, the analysts had been forecasting revenues of CN¥4.9b and losses of CN¥0.70 per share in 2024. Ergo, there's been a clear change in sentiment, with the analysts administering a notable cut to this year's revenue estimates, while at the same time increasing their loss per share forecasts.

View our latest analysis for Zhihu

The consensus price target fell 15% to CN¥10.06, implicitly signalling that lower earnings per share are a leading indicator for Zhihu's valuation. 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. The most optimistic Zhihu analyst has a price target of CN¥15.69 per share, while the most pessimistic values it at CN¥5.13. With such a wide range in price targets, the analysts are almost certainly betting on widely diverse outcomes for the underlying business. As a result it might not be possible to derive much meaning from the consensus price target, which is after all just an average of this wide range of estimates.

These estimates are interesting, but it can be useful to paint some more broad strokes when seeing how forecasts compare, both to the Zhihu's past performance and to peers in the same industry. These estimates imply that sales are expected to slow, with a forecast annualised revenue decline of 11% by the end of 2024. This indicates a significant reduction from annual growth of 31% 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 9.9% annually for the foreseeable future. It's pretty clear that Zhihu's revenues are expected to perform substantially worse than the wider industry.

The Bottom Line

The most important thing to take away is that analysts increased their loss per share estimates for this year. Unfortunately analysts also downgraded their revenue estimates, and industry data suggests that Zhihu's revenues are expected to grow slower than the wider market. With a serious cut to this year's expectations and a falling price target, we wouldn't be surprised if investors were becoming wary of Zhihu.

Still, the long-term prospects of the business are much more relevant than next year's earnings. We have estimates - from multiple Zhihu analysts - going out to 2026, 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.