Downgrade: Here's How Analysts See Quantum Corporation (NASDAQ:QMCO) Performing In The Near Term

The analysts covering Quantum Corporation (NASDAQ:QMCO) delivered a dose of negativity to shareholders today, by making a substantial revision to their statutory forecasts for next year. Revenue and earnings per share (EPS) forecasts were both revised downwards, with analysts seeing grey clouds on the horizon.

Following the downgrade, the latest consensus from Quantum's four analysts is for revenues of US$386m in 2023, which would reflect a credible 4.4% improvement in sales compared to the last 12 months. Losses are predicted to fall substantially, shrinking 52% to US$0.33. Yet before this consensus update, the analysts had been forecasting revenues of US$429m and losses of US$0.097 per share in 2023. 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.

Check out our latest analysis for Quantum

The consensus price target fell 42% to US$6.67, with the analysts clearly concerned about the company following the weaker revenue and earnings outlook. 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 Quantum, with the most bullish analyst valuing it at US$10.00 and the most bearish at US$4.00 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.

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. For example, we noticed that Quantum's rate of growth is expected to accelerate meaningfully, with revenues forecast to exhibit 3.5% growth to the end of 2023 on an annualised basis. That is well above its historical decline of 7.0% a year over the past five years. By contrast, our data suggests that other companies (with analyst coverage) in a similar industry are forecast to see their revenue grow 5.5% per year. Although Quantum's revenues are expected to improve, it seems that the analysts are still bearish on the business, forecasting it to grow slower than the broader 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 Quantum'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.

So things certainly aren't looking great, and you should also know that we've spotted some potential warning signs with Quantum, including recent substantial insider selling. Learn more, and discover the 4 other warning signs 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.

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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.