Yahoo Finance The Consensus EPS Estimates For Zhihu Inc. (NYSE:ZH) Just Fell Dramatically
The latest analyst coverage could presage a bad day for Zhihu Inc. (NYSE:ZH), with the analysts making across-the-board cuts to their statutory estimates that might leave shareholders a little shell-shocked. 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 eight analysts covering Zhihu, is for revenues of CN¥3.8b in 2024, which would reflect a chunky 11% reduction in Zhihu's sales over the past 12 months. Losses are predicted to fall substantially, shrinking 37% to CN¥0.90 per share. Yet before this consensus update, the analysts had been forecasting revenues of CN¥4.9b and losses of CN¥0.70 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.
Check out our latest analysis for Zhihu
The consensus price target fell 15% to CN¥10.06, implicitly signalling that lower earnings per share are a leading indicator for Zhihu'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. Currently, the most bullish analyst values Zhihu at CN¥15.69 per share, while the most bearish prices it at CN¥5.13. We would probably assign less value to the forecasts in this situation, because such a wide range of estimates could imply that the future of this business is difficult to value accurately. As a result it might not be possible to derive much meaning from the consensus price target, which is after all just an average of this wide range of estimates.
Looking at the bigger picture now, one of the ways we can make sense of these forecasts is to see how they measure up against both past performance and industry growth estimates. We would highlight that sales are expected to reverse, with a forecast 11% annualised revenue decline to the end of 2024. That is a notable change from historical growth of 31% over the last three years. Compare this with our data, which suggests that other companies in the same industry are, in aggregate, expected to see their revenue grow 9.9% per year. It's pretty clear that Zhihu'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. Regrettably, they also downgraded their revenue estimates, and the latest forecasts imply the business will grow sales slower than the wider market. After such a stark change in sentiment from analysts, we'd understand if readers now felt a bit wary of Zhihu.
Even so, the longer term trajectory of the business is much more important for the value creation of shareholders. We have estimates - from multiple Zhihu 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.
