Stock Analysis

Bearish: Analysts Just Cut Their EMCORE Corporation (NASDAQ:EMKR) Revenue and EPS estimates

  •  Updated
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Today is shaping up negative for EMCORE Corporation (NASDAQ:EMKR) shareholders, with the analysts delivering a substantial negative revision to this year's forecasts. 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.

Following the downgrade, the consensus from four analysts covering EMCORE is for revenues of US$143m in 2022, implying an uneasy 15% decline in sales compared to the last 12 months. Statutory earnings per share are supposed to dive 86% to US$0.095 in the same period. Prior to this update, the analysts had been forecasting revenues of US$177m and earnings per share (EPS) of US$0.58 in 2022. It looks like analyst sentiment has declined substantially, with a substantial drop in revenue estimates and a pretty serious decline to earnings per share numbers as well.

View our latest analysis for EMCORE

NasdaqGM:EMKR Earnings and Revenue Growth February 16th 2022

The consensus price target fell 45% to US$7.63, with the weaker earnings outlook clearly leading analyst valuation estimates. The consensus price target is just an average of individual analyst targets, so - it could be handy to see how wide the range of underlying estimates is. There are some variant perceptions on EMCORE, with the most bullish analyst valuing it at US$10.00 and the most bearish at US$4.50 per share. This is a fairly broad spread of estimates, suggesting that the analysts are forecasting a wide range of possible outcomes for the business.

Another way we can view these estimates is in the context of the bigger picture, such as how the forecasts stack up against past performance, and whether forecasts are more or less bullish relative to other companies in the industry. We would highlight that sales are expected to reverse, with a forecast 19% annualised revenue decline to the end of 2022. That is a notable change from historical growth of 7.1% 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 7.0% annually for the foreseeable future. So although its revenues are forecast to shrink, this cloud does not come with a silver lining - EMCORE is expected to lag the wider industry.

The Bottom Line

The biggest issue in the new estimates is that analysts have reduced their earnings per share estimates, suggesting business headwinds lay ahead for EMCORE. Unfortunately analysts also downgraded their revenue estimates, and industry data suggests that EMCORE'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 EMCORE.

As you can see, the analysts clearly aren't bullish, and there might be good reason for that. We've identified some potential issues with EMCORE's financials, such as concerns around earnings quality. Learn more, and discover the 2 other risks we've identified, for free on our platform here.

Of course, seeing company management invest large sums of money in a stock can be just as useful as knowing whether analysts are downgrading their estimates. So you may also wish to search this free list of stocks that insiders are buying.

Valuation is complex, but we're helping make it simple.

Find out whether EMCORE is potentially over or undervalued by checking out our comprehensive analysis, which includes fair value estimates, risks and warnings, dividends, insider transactions and financial health.

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