Stock Analysis

Downgrade: Here's How Analysts See Dada Nexus Limited (NASDAQ:DADA) Performing In The Near Term

NasdaqGS:DADA
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Market forces rained on the parade of Dada Nexus Limited (NASDAQ:DADA) shareholders today, when the analysts downgraded their forecasts for this year. Both revenue and earnings per share (EPS) forecasts went under the knife, suggesting analysts have soured majorly on the business.

After the downgrade, the ten analysts covering Dada Nexus are now predicting revenues of CN¥6.7b in 2021. If met, this would reflect a notable 16% improvement in sales compared to the last 12 months. The loss per share is anticipated to greatly reduce in the near future, narrowing 35% to CN¥8.06. Yet before this consensus update, the analysts had been forecasting revenues of CN¥9.1b and losses of CN¥5.87 per share in 2021. 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.

Check out our latest analysis for Dada Nexus

earnings-and-revenue-growth
NasdaqGS:DADA Earnings and Revenue Growth March 13th 2021

The consensus price target fell 9.0% to CN¥286, implicitly signalling that lower earnings per share are a leading indicator for Dada Nexus' 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 Dada Nexus analyst has a price target of CN¥53.11 per share, while the most pessimistic values it at CN¥32.07. This is a very narrow spread of estimates, implying either that Dada Nexus is an easy company to value, or - more likely - the analysts are relying heavily on some key assumptions.

These estimates are interesting, but it can be useful to paint some more broad strokes when seeing how forecasts compare, both to the Dada Nexus' past performance and to peers in the same industry. We would highlight that Dada Nexus' revenue growth is expected to slow, with the forecast 16% annualised growth rate until the end of 2021 being well below the historical 41% p.a. growth over the last three years. Juxtapose this against the other companies in the industry with analyst coverage, which are forecast to grow their revenues (in aggregate) 17% annually. Factoring in the forecast slowdown in growth, it looks like Dada Nexus is forecast to grow at about the same rate as 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. Lamentably, they also downgraded their sales forecasts, but the business is still expected to grow at roughly the same rate as the market itself. 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 Dada Nexus.

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 Dada Nexus going out to 2024, 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. 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.
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