The latest analyst coverage could presage a bad day for BAIC Motor Corporation Limited (HKG:1958), with the analysts making across-the-board cuts to their statutory estimates that might leave shareholders a little shell-shocked. Revenue and earnings per share (EPS) forecasts were both revised downwards, with analysts seeing grey clouds on the horizon.
Following the downgrade, the consensus from five analysts covering BAIC Motor is for revenues of CN¥177b in 2024, implying an uncomfortable 11% decline in sales compared to the last 12 months. Statutory earnings per share are presumed to accumulate 3.1% to CN¥0.39. Prior to this update, the analysts had been forecasting revenues of CN¥206b and earnings per share (EPS) of CN¥0.54 in 2024. Indeed, we can see that the analysts are a lot more bearish about BAIC Motor's prospects, administering a measurable cut to revenue estimates and slashing their EPS estimates to boot.
Analysts made no major changes to their price target of CN¥2.10, suggesting the downgrades are not expected to have a long-term impact on BAIC Motor's valuation. The consensus price target is just an average of individual analyst targets, so - it could be handy to see how wide the range of underlying estimates is. There are some variant perceptions on BAIC Motor, with the most bullish analyst valuing it at CN¥3.12 and the most bearish at CN¥1.30 per share. Note the wide gap in analyst price targets? This implies to us that there is a fairly broad range of possible scenarios for the underlying business.
Of course, another way to look at these forecasts is to place them into context against the industry itself. These estimates imply that sales are expected to slow, with a forecast annualised revenue decline of 11% by the end of 2024. This indicates a significant reduction from annual growth of 4.6% over the last five years. By contrast, our data suggests that other companies (with analyst coverage) in the same industry are forecast to see their revenue grow 14% annually for the foreseeable future. So although its revenues are forecast to shrink, this cloud does not come with a silver lining - BAIC Motor is expected to lag the wider industry.
The Bottom Line
The most important thing to take away is that analysts cut their earnings per share estimates, expecting a clear decline in business conditions. Unfortunately analysts also downgraded their revenue estimates, and industry data suggests that BAIC Motor's revenues are expected to grow slower 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 BAIC Motor.
Still, the long-term prospects of the business are much more relevant than next year's earnings. We have estimates - from multiple BAIC Motor analysts - 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.