The analysts covering StarPower Semiconductor Ltd. (SHSE:603290) delivered a dose of negativity to shareholders today, by making a substantial revision to their statutory forecasts for this year. Revenue and earnings per share (EPS) forecasts were both revised downwards, with the analysts seeing grey clouds on the horizon.

After this downgrade, StarPower Semiconductor's 17 analysts are now forecasting revenues of CN¥4.0b in 2024. This would be an okay 7.9% improvement in sales compared to the last 12 months. Statutory earnings per share are supposed to descend 15% to CN¥4.30 in the same period. Previously, the analysts had been modelling revenues of CN¥4.7b and earnings per share (EPS) of CN¥6.47 in 2024. It looks like analyst sentiment has declined substantially, with a measurable cut to revenue estimates and a large cut to earnings per share numbers as well.

Despite the cuts to forecast earnings, there was no real change to the CN¥202 price target, showing that the analysts don't think the changes have a meaningful impact on its intrinsic value.

Another way we can view these estimates is in the context of the bigger picture, such as how the forecasts stack up against past performance, and whether forecasts are more or less bullish relative to other companies in the industry. It's pretty clear that there is an expectation that StarPower Semiconductor's revenue growth will slow down substantially, with revenues to the end of 2024 expected to display 11% growth on an annualised basis. This is compared to a historical growth rate of 37% over the past five years. By way of comparison, the other companies in this industry with analyst coverage are forecast to grow their revenue at 23% per year. Factoring in the forecast slowdown in growth, it seems obvious that StarPower Semiconductor is also expected to grow slower than other industry participants.

The Bottom Line

The biggest issue in the new estimates is that analysts have reduced their earnings per share estimates, suggesting business headwinds lay ahead for StarPower Semiconductor. Regrettably, they also downgraded their revenue estimates, and the latest forecasts imply the business will grow sales 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 StarPower Semiconductor after the downgrade.

That said, the analysts might have good reason to be negative on StarPower Semiconductor, given concerns around earnings quality. Learn more, and discover the 1 other risk we've identified, for free on our platform here.

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