What You Need To Know About The Stronghold Digital Mining, Inc. (NASDAQ:SDIG) Analyst Downgrade Today

The latest analyst coverage could presage a bad day for Stronghold Digital Mining, Inc. (NASDAQ:SDIG), with the analysts making across-the-board cuts to their statutory estimates that might leave shareholders a little shell-shocked. Revenue estimates were cut sharply as analysts signalled a weaker outlook - perhaps a sign that investors should temper their expectations as well. At US$2.49, shares are up 9.2% in the past 7 days. We'd be curious to see if the downgrade is enough to reverse investor sentiment on the business.

Following the downgrade, the current consensus from Stronghold Digital Mining's five analysts is for revenues of US$159m in 2022 which - if met - would reflect a substantial 414% increase on its sales over the past 12 months. The loss per share is anticipated to greatly reduce in the near future, narrowing 31% to US$0.16. However, before this estimates update, the consensus had been expecting revenues of US$181m and US$0.16 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 making no real change to the loss per share numbers.

See our latest analysis for Stronghold Digital Mining

the analysts have cut their price target 21% to US$12.83 per share, signalling that the declining revenue and ongoing losses are contributing to the lower 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. There are some variant perceptions on Stronghold Digital Mining, with the most bullish analyst valuing it at US$26.00 and the most bearish at US$10.00 per share. As you can see the range of estimates is wide, with the lowest valuation coming in at less than half the most bullish estimate, suggesting there are some strongly diverging views on how think this business will perform. 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.

One way to get more context on these forecasts is to look at how they compare to both past performance, and how other companies in the same industry are performing. It's clear from the latest estimates that Stronghold Digital Mining's rate of growth is expected to accelerate meaningfully, with the forecast 8x annualised revenue growth to the end of 2022 noticeably faster than its historical growth of 651% over the past year. By contrast, our data suggests that other companies (with analyst coverage) in a similar industry are forecast to grow their revenue at 14% per year. It seems obvious that, while the growth outlook is brighter than the recent past, the analysts also expect Stronghold Digital Mining to grow faster than the wider industry.

The Bottom Line

While analysts did downgrade their revenue estimates, these forecasts still imply revenues will perform better than the wider market. Furthermore, there was a cut to the price target, suggesting that the latest news has led to more pessimism about the intrinsic value of the business. 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 Stronghold Digital Mining after today.

With that said, the long-term trajectory of the company's earnings is a lot more important than next year. At Simply Wall St, we have a full range of analyst estimates for Stronghold Digital Mining 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. 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.