Things Look Grim For Harmonic Inc. (NASDAQ:HLIT) After Today's Downgrade

The analysts covering Harmonic Inc. (NASDAQ:HLIT) delivered a dose of negativity to shareholders today, by making a substantial revision to their statutory forecasts for this year. Both revenue and earnings per share (EPS) forecasts went under the knife, suggesting analysts have soured majorly on the business.

Following the latest downgrade, Harmonic's five analysts currently expect revenues in 2023 to be US$642m, approximately in line with the last 12 months. Statutory earnings per share are supposed to descend 19% to US$0.15 in the same period. Previously, the analysts had been modelling revenues of US$724m and earnings per share (EPS) of US$0.46 in 2023. It looks like analyst sentiment has declined substantially, with a measurable cut to revenue estimates and a large cut to earnings per share numbers as well.

See our latest analysis for Harmonic

It'll come as no surprise then, to learn that the analysts have cut their price target 13% to US$18.17.

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 Harmonic's revenue growth is expected to slow, with the forecast 2.7% annualised growth rate until the end of 2023 being well below the historical 12% p.a. growth over the last five years. Compare this against other companies (with analyst forecasts) in the industry, which are in aggregate expected to see revenue growth of 5.1% annually. So it's pretty clear that, while revenue growth is expected to slow down, the wider industry is also expected to grow faster than Harmonic.

The Bottom Line

The most important thing to take away is that analysts cut their earnings per share estimates, expecting a clear decline in business conditions. Regrettably, they also downgraded their revenue estimates, and the latest forecasts imply the business will grow sales 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 Harmonic.

With that said, the long-term trajectory of the company's earnings is a lot more important than next year. We have estimates - from multiple Harmonic analysts - 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.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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.