This Broker Just Slashed Their SuperCom Ltd. (NASDAQ:SPCB) Earnings Forecasts

Today is shaping up negative for SuperCom Ltd. (NASDAQ:SPCB) shareholders, with the covering analyst delivering a substantial negative revision to next year's forecasts. Both revenue and earnings per share (EPS) forecasts went under the knife, suggesting the analyst has soured majorly on the business.

Following the downgrade, the current consensus from SuperCom's solitary analyst is for revenues of US$19m in 2023 which - if met - would reflect a solid 19% increase on its sales over the past 12 months. The loss per share is anticipated to greatly reduce in the near future, narrowing 35% to US$2.26. Yet before this consensus update, the analyst had been forecasting revenues of US$26m and losses of US$1.00 per share in 2023. Ergo, there's been a clear change in sentiment, with the analyst administering a notable cut to next year's revenue estimates, while at the same time increasing their loss per share forecasts.

See our latest analysis for SuperCom

The consensus price target fell 50% to US$5.00, implicitly signalling that lower earnings per share are a leading indicator for SuperCom's valuation.

Of course, another way to look at these forecasts is to place them into context against the industry itself. For example, we noticed that SuperCom's rate of growth is expected to accelerate meaningfully, with revenues forecast to exhibit 15% growth to the end of 2023 on an annualised basis. That is well above its historical decline of 24% a year over the past five years. Compare this against analyst estimates for the broader industry, which suggest that (in aggregate) industry revenues are expected to grow 5.2% annually. So it looks like SuperCom is expected to grow faster than its competitors, at least for a while.

The Bottom Line

The most important thing to note from this downgrade is that the consensus increased its forecast losses next year, suggesting all may not be well at SuperCom. Unfortunately, the analyst also downgraded their revenue estimates, although our data indicates revenues are expected to perform better 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 covering analyst clearly isn't bullish, and there might be good reason for that. We've identified some potential issues with SuperCom's financials, such as a short cash runway. For more information, you can click here to discover this and the 2 other warning signs 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.