Today is shaping up negative for GCL Technology Holdings Limited (HKG:3800) shareholders, with the analysts delivering a substantial negative revision to this year's forecasts. There was a fairly draconian cut to their revenue estimates, perhaps an implicit admission that previous forecasts were much too optimistic.

Following the downgrade, the latest consensus from GCL Technology Holdings' six analysts is for revenues of CN¥35b in 2022, which would reflect a substantial 34% improvement in sales compared to the last 12 months. Per-share earnings are expected to jump 55% to CN¥0.55. Prior to this update, the analysts had been forecasting revenues of CN¥50b and earnings per share (EPS) of CN¥0.55 in 2022. Indeed we can see that the consensus opinion has undergone some fundamental changes following the recent consensus updates, with a pretty serious reduction to revenues and some minor tweaks to earnings numbers.

View our latest analysis for GCL Technology Holdings

The average price target was steady at CN¥4.02 even though revenue estimates declined; likely suggesting the analysts place a higher value on earnings. 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. There are some variant perceptions on GCL Technology Holdings, with the most bullish analyst valuing it at CN¥4.97 and the most bearish at CN¥3.42 per share. These price targets show that analysts do have some differing views on the business, but the estimates do not vary enough to suggest to us that some are betting on wild success or utter failure.

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. For example, we noticed that GCL Technology Holdings' rate of growth is expected to accelerate meaningfully, with revenues forecast to exhibit 79% growth to the end of 2022 on an annualised basis. That is well above its historical decline of 3.3% a year over the past five years. Compare this against analyst estimates for the broader industry, which suggest that (in aggregate) industry revenues are expected to grow 13% annually. So it looks like GCL Technology Holdings is expected to grow faster than its competitors, at least for a while.

The Bottom Line

The most important thing to take away is that there's been no major change in sentiment, with analysts reconfirming that earnings per share are expected to continue performing in line with their prior expectations. Unfortunately, analysts also downgraded their revenue estimates, although our data indicates revenues are expected to perform better than the wider market. Given the stark change in sentiment, we'd understand if investors became more cautious on GCL Technology Holdings after today.

After a downgrade like this, it's pretty clear that previous forecasts were too optimistic. What's more, we've spotted several possible issues with GCL Technology Holdings' business, like dilutive stock issuance over the past year. For more information, you can click here to discover this and the 1 other concern we've identified.

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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