The analysts covering Valens Semiconductor Ltd. (NYSE:VLN) delivered a dose of negativity to shareholders today, by making a substantial revision to their statutory forecasts for this year. Both revenue and earnings per share (EPS) forecasts went under the knife, suggesting analysts have soured majorly on the business.
Following the latest downgrade, the current consensus, from the three analysts covering Valens Semiconductor, is for revenues of US$54m in 2024, which would reflect a stressful 36% reduction in Valens Semiconductor's sales over the past 12 months. Per-share losses are expected to see a sharp uptick, reaching US$0.22. Yet before this consensus update, the analysts had been forecasting revenues of US$73m and losses of US$0.12 per share in 2024. 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.
The consensus price target fell 8.3% to US$3.67, implicitly signalling that lower earnings per share are a leading indicator for Valens Semiconductor's valuation.
Taking a look at the bigger picture now, one of the ways we can understand these forecasts is to see how they compare to both past performance and industry growth estimates. We would highlight that sales are expected to reverse, with a forecast 36% annualised revenue decline to the end of 2024. That is a notable change from historical growth of 17% 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 16% annually for the foreseeable future. So although its revenues are forecast to shrink, this cloud does not come with a silver lining - Valens Semiconductor is expected to lag the wider industry.
The Bottom Line
The most important thing to note from this downgrade is that the consensus increased its forecast losses this year, suggesting all may not be well at Valens Semiconductor. Unfortunately analysts also downgraded their revenue estimates, and industry data suggests that Valens Semiconductor's revenues are expected to grow slower than the wider market. Given the scope of the downgrades, it would not be a surprise to see the market become more wary of the business.
Still, the long-term prospects of the business are much more relevant than next year's earnings. At Simply Wall St, we have a full range of analyst estimates for Valens Semiconductor going out to 2026, 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.
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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.