Analysts Are More Bearish On SiTime Corporation (NASDAQ:SITM) Than They Used To Be

One thing we could say about the analysts on SiTime Corporation (NASDAQ:SITM) - they aren't optimistic, having just made a major negative revision to their near-term (statutory) forecasts for the organization. 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.

After the downgrade, the consensus from SiTime's four analysts is for revenues of US$147m in 2023, which would reflect a sizeable 41% decline in sales compared to the last year of performance. Following this this downgrade, earnings are now expected to tip over into loss-making territory, with the analysts forecasting losses of US$3.22 per share in 2023. However, before this estimates update, the consensus had been expecting revenues of US$204m and US$1.37 per share in losses. So there's been quite a change-up of views after the recent consensus updates, with the analysts making a serious cut to their revenue forecasts while also expecting losses per share to increase.

View our latest analysis for SiTime

The consensus price target fell 17% to US$117, implicitly signalling that lower earnings per share are a leading indicator for SiTime's valuation. 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 SiTime, with the most bullish analyst valuing it at US$130 and the most bearish at US$88.00 per share. This shows there is still some diversity in estimates, but analysts don't appear to be totally split on the stock as though it might be a success or failure situation.

These estimates are interesting, but it can be useful to paint some more broad strokes when seeing how forecasts compare, both to the SiTime's past performance and to peers in the same industry. We would highlight that sales are expected to reverse, with a forecast 51% annualised revenue decline to the end of 2023. That is a notable change from historical growth of 41% 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 12% per year. So although its revenues are forecast to shrink, this cloud does not come with a silver lining - SiTime is expected to lag the wider industry.

The Bottom Line

The most important thing to note from this downgrade is that the consensus increased its forecast losses this year, suggesting all may not be well at SiTime. Unfortunately analysts also downgraded their revenue estimates, and industry data suggests that SiTime'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 SiTime.

That said, the analysts might have good reason to be negative on SiTime, given its declining profit margins. For more information, you can click here to discover this and the 4 other warning signs we've identified.

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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.