Analysts Just Made A Major Revision To Their African Rainbow Minerals Limited (JSE:ARI) Revenue Forecasts

The analysts covering African Rainbow Minerals Limited (JSE:ARI) delivered a dose of negativity to shareholders today, by making a substantial revision to their statutory forecasts for this year. This report focused on revenue estimates, and it looks as though the consensus view of the business has become substantially more conservative. At R264, shares are up 5.9% in the past 7 days. Investors could be forgiven for changing their mind on the business following the downgrade; but it's not clear if the revised forecasts will lead to selling activity.

Following the downgrade, the most recent consensus for African Rainbow Minerals from its five analysts is for revenues of R21b in 2023 which, if met, would be a substantial 25% increase on its sales over the past 12 months. Before the latest update, the analysts were foreseeing R24b of revenue in 2023. It looks like forecasts have become a fair bit less optimistic on African Rainbow Minerals, given the substantial drop in revenue estimates.

View our latest analysis for African Rainbow Minerals

We'd point out that there was no major changes to their price target of R275, suggesting the latest estimates were not enough to shift their view on the value of the business. 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. Currently, the most bullish analyst values African Rainbow Minerals at R320 per share, while the most bearish prices it at R210. This shows there is still some diversity in estimates, but analysts don't appear to be totally split on the stock as though it might be a success or failure situation.

Taking a look at the bigger picture now, one of the ways we can understand these forecasts is to see how they compare to both past performance and industry growth estimates. The period to the end of 2023 brings more of the same, according to the analysts, with revenue forecast to display 25% growth on an annualised basis. That is in line with its 21% annual growth over the past five years. Compare this with the broader industry, which analyst estimates (in aggregate) suggest will see revenues grow 1.6% annually. So although African Rainbow Minerals is expected to maintain its revenue growth rate, it's definitely expected to grow faster than the wider industry.

The Bottom Line

The clear low-light was that analysts slashing their revenue forecasts for African Rainbow Minerals this year. Analysts also expect revenues to grow faster than the wider market. Often, one downgrade can set off a daisy-chain of cuts, especially if an industry is in decline. So we wouldn't be surprised if the market became a lot more cautious on African Rainbow Minerals after today.

Still got questions? We have estimates for African Rainbow Minerals from its five analysts out until 2025, and you can see them free on our platform here.

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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.