The analysts covering Lightning eMotors, Inc. (NYSE:ZEV) delivered a dose of negativity to shareholders today, by making a substantial revision to their statutory forecasts for next year. Both revenue and earnings per share (EPS) estimates were cut sharply as the analysts factored in the latest outlook for the business, concluding that they were too optimistic previously.
Following the downgrade, the current consensus from Lightning eMotors' six analysts is for revenues of US$134m in 2022 which - if met - would reflect a substantial increase on its sales over the past 12 months. Losses are predicted to fall substantially, shrinking 69% to US$0.58. Yet before this consensus update, the analysts had been forecasting revenues of US$196m and losses of US$0.44 per share in 2022. 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.
The consensus price target was broadly unchanged at US$13.00, perhaps implicitly signalling that the weaker earnings outlook is not expected to have a long-term impact on the valuation. 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 Lightning eMotors at US$17.00 per share, while the most bearish prices it at US$6.00. This is a fairly broad spread of estimates, suggesting that the analysts are forecasting a wide range of possible outcomes for the business.
One way to get more context on these forecasts is to look at how they compare to both past performance, and how other companies in the same industry are performing. It's clear from the latest estimates that Lightning eMotors' rate of growth is expected to accelerate meaningfully, with the forecast 3x annualised revenue growth to the end of 2022 noticeably faster than its historical growth of 69% p.a. over the past three years. Compare this with other companies in the same industry, which are forecast to grow their revenue 9.3% annually. Factoring in the forecast acceleration in revenue, it's pretty clear that Lightning eMotors is expected to grow much faster than its industry.
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 Lightning eMotors. While analysts did downgrade their revenue estimates, these forecasts still imply revenues will perform better than the wider market. We're also surprised to see that the price target went unchanged. Still, deteriorating business conditions (assuming accurate forecasts!) can be a leading indicator for the stock price, so we wouldn't blame investors for being more cautious on Lightning eMotors after the downgrade.
Still, the long-term prospects of the business are much more relevant than next year's earnings. We have estimates - from multiple Lightning eMotors analysts - going out to 2023, and you can see them 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.
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.
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