One thing we could say about the analysts on AcuityAds Holdings Inc. (TSE:AT) - they aren't optimistic, having just made a major negative revision to their near-term (statutory) forecasts for the organization. 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. Surprisingly the share price has been buoyant, rising 14% to CA$3.70 in the past 7 days. It will be interesting to see if the downgrade has an impact on buying demand for the company's shares.
Following the downgrade, the current consensus from AcuityAds Holdings' seven analysts is for revenues of CA$125m in 2022 which - if met - would reflect a satisfactory 7.2% increase on its sales over the past 12 months. Following this this downgrade, earnings are now expected to tip over into loss-making territory, with the analysts forecasting losses of CA$0.02 per share in 2022. Previously, the analysts had been modelling revenues of CA$140m and earnings per share (EPS) of CA$0.041 in 2022. So we can see that the consensus has become notably more bearish on AcuityAds Holdings' outlook with these numbers, making a measurable cut to this year's revenue estimates. Furthermore, they expect the business to be loss-making this year, compared to their previous forecasts of a profit.
There was no major change to the consensus price target of CA$4.79, signalling that the business is performing roughly in line with expectations, despite lower earnings per share forecasts. It could also be instructive to look at the range of analyst estimates, to evaluate how different the outlier opinions are from the mean. There are some variant perceptions on AcuityAds Holdings, with the most bullish analyst valuing it at CA$7.00 and the most bearish at CA$3.00 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.
These estimates are interesting, but it can be useful to paint some more broad strokes when seeing how forecasts compare, both to the AcuityAds Holdings' past performance and to peers in the same industry. We can infer from the latest estimates that forecasts expect a continuation of AcuityAds Holdings'historical trends, as the 15% annualised revenue growth to the end of 2022 is roughly in line with the 16% annual revenue growth 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 revenues grow 10% per year. So it's pretty clear that AcuityAds Holdings is forecast to grow substantially faster than its industry.
The Bottom Line
The most important thing to take away is that analysts are expecting AcuityAds Holdings to become unprofitable this year. While analysts did downgrade their revenue estimates, these forecasts still imply revenues will perform better than the wider market. The lack of change in the price target is puzzling in light of the downgrade but, with a serious decline expected this year, we wouldn't be surprised if investors were a bit wary of AcuityAds Holdings.
Even so, the longer term trajectory of the business is much more important for the value creation of shareholders. At Simply Wall St, we have a full range of analyst estimates for AcuityAds Holdings going out to 2024, 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.
Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.
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.
Join A Paid User Research Session
You’ll receive a US$30 Amazon Gift card for 1 hour of your time while helping us build better investing tools for the individual investors like yourself. Sign up here