Time To Worry? Analysts Are Downgrading Their nLIGHT, Inc. (NASDAQ:LASR) Outlook

One thing we could say about the analysts on nLIGHT, Inc. (NASDAQ:LASR) - they aren't optimistic, having just made a major negative revision to their near-term (statutory) forecasts for the organization. Revenue and earnings per share (EPS) forecasts were both revised downwards, with the analysts seeing grey clouds on the horizon.

Following the latest downgrade, the current consensus, from the seven analysts covering nLIGHT, is for revenues of US$238m in 2023, which would reflect a perceptible 5.8% reduction in nLIGHT's sales over the past 12 months. Per-share losses are expected to see a sharp uptick, reaching US$1.06. However, before this estimates update, the consensus had been expecting revenues of US$288m and US$0.67 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 expecting losses per share to increase.

Our analysis indicates that LASR is potentially overvalued!

The consensus price target fell 24% to US$17.40, with the analysts clearly concerned about the company following the weaker revenue and earnings outlook. It could also be instructive to look at the range of analyst estimates, to evaluate how different the outlier opinions are from the mean. There are some variant perceptions on nLIGHT, with the most bullish analyst valuing it at US$30.00 and the most bearish at US$10.00 per share. So we wouldn't be assigning too much credibility to analyst price targets in this case, because there are clearly some widely differing views on what kind of performance this business can generate. With this in mind, we wouldn't rely too heavily on the consensus price target, as it is just an average and analysts clearly have some deeply divergent views on the business.

Looking at the bigger picture now, one of the ways we can make sense of these forecasts is to see how they measure up against both past performance and industry growth estimates. We would highlight that sales are expected to reverse, with a forecast 4.6% annualised revenue decline to the end of 2023. That is a notable change from historical growth of 13% 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 5.7% annually for the foreseeable future. It's pretty clear that nLIGHT's revenues are expected to perform substantially worse than the wider industry.

The Bottom Line

The most important thing to take away is that analysts increased their loss per share estimates for next year. Unfortunately analysts also downgraded their revenue estimates, and industry data suggests that nLIGHT's revenues are expected to grow slower than the wider market. Given the scope of the downgrades, it would not be a surprise to see the market become more wary of the business.

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 nLIGHT's financials, such as dilutive stock issuance over the past year. For more information, you can click here to discover this and the 2 other risks we've identified.

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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.