Time To Worry? Analysts Just Downgraded Their Daqo New Energy Corp. (NYSE:DQ) Outlook

One thing we could say about the analysts on Daqo New Energy Corp. (NYSE:DQ) - they aren't optimistic, having just made a major negative revision to their near-term (statutory) forecasts for the organization. There was a fairly draconian cut to their revenue estimates, perhaps an implicit admission that previous forecasts were much too optimistic.

Following the latest downgrade, the twelve analysts covering Daqo New Energy provided consensus estimates of US$2.9b revenue in 2023, which would reflect a considerable 16% decline on its sales over the past 12 months. Statutory earnings per share are presumed to ascend 14% to US$15.30. Before this latest update, the analysts had been forecasting revenues of US$3.6b and earnings per share (EPS) of US$15.30 in 2023. So there's been a clear change in analyst sentiment in the recent update, with the analysts making a sizeable cut to revenues and reconfirming their earnings per share estimates.

Check out our latest analysis for Daqo New Energy

Of course, another way to look at these forecasts is to place them into context against the industry itself. These estimates imply that sales are expected to slow, with a forecast annualised revenue decline of 30% by the end of 2023. This indicates a significant reduction from annual growth of 57% over the last five years. By contrast, our data suggests that other companies (with analyst coverage) in the same industry are forecast to see their revenue grow 14% annually for the foreseeable future. So although its revenues are forecast to shrink, this cloud does not come with a silver lining - Daqo New Energy is expected to lag the wider industry.

The Bottom Line

The most important thing to take away is that there's been no major change in sentiment, with analysts reconfirming that earnings per share are expected to continue performing in line with their prior expectations. Regrettably, they also downgraded their revenue estimates, and the latest forecasts imply the business will grow sales slower than the wider market. Often, one downgrade can set off a daisy-chain of cuts, especially if an industry is in decline. So we wouldn't be surprised if the market became a lot more cautious on Daqo New Energy after today.

After a downgrade like this, it's pretty clear that previous forecasts were too optimistic. What's more, we've spotted several possible issues with Daqo New Energy's business, like dilutive stock issuance over the past year. Learn more, and discover the 2 other concerns we've identified, for 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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