Today is shaping up negative for FTC Solar, Inc. (NASDAQ:FTCI) shareholders, with the analysts delivering a substantial negative revision to this year's forecasts. Both revenue and earnings per share (EPS) forecasts went under the knife, suggesting the analysts have soured majorly on the business. Bidders are definitely seeing a different story, with the stock price of US$5.40 reflecting a 11% rise in the past week. It will be interesting to see if the downgrade has an impact on buying demand for the company's shares.
Following the downgrade, the consensus from seven analysts covering FTC Solar is for revenues of US$178m in 2022, implying a substantial 24% decline in sales compared to the last 12 months. Losses are predicted to fall substantially, shrinking 23% to US$0.76. Yet before this consensus update, the analysts had been forecasting revenues of US$217m and losses of US$0.67 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.
There was no major change to the consensus price target of US$5.93, signalling that the business is performing roughly in line with expectations, despite lower earnings per share forecasts. That's not the only conclusion we can draw from this data however, as some investors also like to consider the spread in estimates when evaluating analyst price targets. Currently, the most bullish analyst values FTC Solar at US$8.00 per share, while the most bearish prices it at US$3.00. This is a fairly broad spread of estimates, suggesting that the analysts are forecasting a wide range of possible outcomes for the business.
These estimates are interesting, but it can be useful to paint some more broad strokes when seeing how forecasts compare, both to the FTC Solar's past performance and to peers in the same industry. These estimates imply that sales are expected to slow, with a forecast annualised revenue decline of 43% by the end of 2022. This indicates a significant reduction from annual growth of 7.0% over the last year. By contrast, our data suggests that other companies (with analyst coverage) in the same industry are forecast to see their revenue grow 13% annually for the foreseeable future. So although its revenues are forecast to shrink, this cloud does not come with a silver lining - FTC Solar is expected to lag the wider industry.
The Bottom Line
The most important thing to take away is that analysts increased their loss per share estimates for this year. Unfortunately analysts also downgraded their revenue estimates, and industry data suggests that FTC Solar's revenues are expected to grow slower 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 FTC Solar after the downgrade.
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 FTC Solar's financials, such as dilutive stock issuance over the past year. Learn more, and discover the 2 other flags 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.
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