Today is shaping up negative for Cue Health Inc. (NASDAQ:HLTH) shareholders, with the analysts delivering a substantial negative revision to this year's forecasts. This report focused on revenue estimates, and it looks as though the consensus view of the business has become substantially more conservative. At US$2.19, shares are up 9.2% in the past 7 days. We'd be curious to see if the downgrade is enough to reverse investor sentiment on the business.

Following the downgrade, the consensus from four analysts covering Cue Health is for revenues of US$115m in 2023, implying a substantial 76% decline in sales compared to the last 12 months. Losses are supposed to balloon 58% to US$2.03 per share. Yet before this consensus update, the analysts had been forecasting revenues of US$262m and losses of US$1.96 per share in 2023. Ergo, there's been a clear change in sentiment, with the analysts administering a notable cut to this year's revenue estimates, while at the same time increasing their loss per share forecasts.

View our latest analysis for Cue Health

The consensus price target fell 14% to US$5.38, implicitly signalling that lower earnings per share are a leading indicator for Cue Health's valuation. Fixating on a single price target can be unwise though, since the consensus target is effectively the average of analyst price targets. As a result, some investors like to look at the range of estimates to see if there are any diverging opinions on the company's valuation. The most optimistic Cue Health analyst has a price target of US$8.00 per share, while the most pessimistic values it at US$3.50. 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 Cue Health'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 76% by the end of 2023. This indicates a significant reduction from annual growth of 66% over the last three years. By contrast, our data suggests that other companies (with analyst coverage) in the same industry are forecast to see their revenue grow 7.5% annually for the foreseeable future. It's pretty clear that Cue Health's revenues are expected to perform substantially worse than 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 Cue Health's revenues are expected to grow slower than the wider market. The consensus price target fell measurably, with analysts seemingly not reassured by recent business developments, leading to a lower estimate of Cue Health's future valuation. Overall, given the drastic downgrade to this year's forecasts, we'd be feeling a little more wary of Cue Health going forwards.

That said, the analysts might have good reason to be negative on Cue Health, given dilutive stock issuance over the past year. Learn more, and discover the 3 other warning signs 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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