This Canaan Inc. (NASDAQ:CAN) Analyst Is Way More Bearish Than They Used To Be

The analyst covering Canaan Inc. (NASDAQ:CAN) delivered a dose of negativity to shareholders today, by making a substantial revision to their statutory forecasts for this year. Revenue and earnings per share (EPS) forecasts were both revised downwards, with the analyst seeing grey clouds on the horizon. Surprisingly the share price has been buoyant, rising 18% to US$3.38 in the past 7 days. With such a sharp increase, it seems brokers may have seen something that is not yet being priced in by the wider market.

Following the downgrade, the most recent consensus for Canaan from its solo analyst is for revenues of CN¥7.1b in 2022 which, if met, would be a substantial 42% increase on its sales over the past 12 months. Statutory earnings per share are expected to be CN¥11.68, roughly flat on the last 12 months. Prior to this update, the analyst had been forecasting revenues of CN¥8.0b and earnings per share (EPS) of CN¥14.20 in 2022. Indeed, we can see that the analyst is a lot more bearish about Canaan's prospects, administering a measurable cut to revenue estimates and slashing their EPS estimates to boot.

View our latest analysis for Canaan

The consensus price target fell 30% to CN¥67.12, with the weaker earnings outlook clearly leading analyst valuation estimates.

Of course, another way to look at these forecasts is to place them into context against the industry itself. It's clear from the latest estimates that Canaan's rate of growth is expected to accelerate meaningfully, with the forecast 59% annualised revenue growth to the end of 2022 noticeably faster than its historical growth of 22% p.a. over the past three years. By contrast, our data suggests that other companies (with analyst coverage) in a similar industry are forecast to grow their revenue at 5.0% per year. Factoring in the forecast acceleration in revenue, it's pretty clear that Canaan is expected to grow much faster than its industry.

The Bottom Line

The most important thing to take away is that the analyst cut their earnings per share estimates, expecting a clear decline in business conditions. Unfortunately, the analyst also downgraded their revenue estimates, although our data indicates revenues are expected to perform better than the wider market. After such a stark change in sentiment from the analyst, we'd understand if readers now felt a bit wary of Canaan.

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 Canaan's business, like concerns around earnings quality. Learn more, and discover the 1 other risk 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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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.