Iris Energy Limited (NASDAQ:IREN) Analysts Are Cutting Their Estimates: Here's What You Need To Know

It's been a good week for Iris Energy Limited (NASDAQ:IREN) shareholders, because the company has just released its latest yearly results, and the shares gained 7.7% to US$4.49. Revenues came in at US$59m, in line with expectations, while statutory losses per share were substantially higher than expected, at US$10.25 per share. Following the result, the analysts have updated their earnings model, and it would be good to know whether they think there's been a strong change in the company's prospects, or if it's business as usual. With this in mind, we've gathered the latest statutory forecasts to see what the analysts are expecting for next year.

See our latest analysis for Iris Energy

Taking into account the latest results, the most recent consensus for Iris Energy from five analysts is for revenues of US$133.7m in 2023 which, if met, would be a huge 126% increase on its sales over the past 12 months. Statutory losses are forecast to balloon 95% to US$0.36 per share. Yet prior to the latest earnings, the analysts had been anticipated revenues of US$204.6m and earnings per share (EPS) of US$0.84 in 2023. So we can see that the consensus has become notably more bearish on Iris Energy's outlook following these results, with a large cut to next year's revenue estimates. Furthermore, they expect the business to be loss-making next year, compared to their previous calls for a profit.

The average price target fell 19% to US$9.93, implicitly signalling that lower earnings per share are a leading indicator for Iris Energy's valuation. Fixating on a single price target can be unwise though, since the consensus target is effectively the average of analyst price targets. As a result, some investors like to look at the range of estimates to see if there are any diverging opinions on the company's valuation. The most optimistic Iris Energy analyst has a price target of US$15.00 per share, while the most pessimistic values it at US$6.50. This is a fairly broad spread of estimates, suggesting that analysts are forecasting a wide range of possible outcomes for the business.

These estimates are interesting, but it can be useful to paint some more broad strokes when seeing how forecasts compare, both to the Iris Energy's past performance and to peers in the same industry. We can infer from the latest estimates that forecasts expect a continuation of Iris Energy'shistorical trends, as the 126% annualised revenue growth to the end of 2023 is roughly in line with the 106% annual revenue growth over the past three years. Compare this with the broader industry, which analyst estimates (in aggregate) suggest will see revenues grow 13% annually. So although Iris Energy is expected to maintain its revenue growth rate, it's definitely expected to grow faster than the wider industry.

The Bottom Line

The biggest low-light for us was that the forecasts for Iris Energy dropped from profits to a loss next year. They also downgraded their revenue estimates, although industry data suggests that Iris Energy's revenues are expected to grow faster than the wider industry. The consensus price target fell measurably, with the analysts seemingly not reassured by the latest results, leading to a lower estimate of Iris Energy's future valuation.

Keeping that in mind, we still think that the longer term trajectory of the business is much more important for investors to consider. At Simply Wall St, we have a full range of analyst estimates for Iris Energy going out to 2024, and you can see them free on our platform here..

Before you take the next step you should know about the 2 warning signs for Iris Energy (1 is a bit unpleasant!) that we have uncovered.

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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.