Yahoo Finance Earnings Update: Zhihu Inc. (NYSE:ZH) Just Reported And Analysts Are Trimming Their Forecasts
Zhihu Inc. (NYSE:ZH) shareholders are probably feeling a little disappointed, since its shares fell 3.7% to US$0.68 in the week after its latest full-year results. It was a respectable set of results; while revenues of CN¥4.2b were in line with analyst predictions, statutory losses were 12% smaller than expected, with Zhihu losing CN¥1.41 per share. The analysts typically update their forecasts at each earnings report, and we can judge from their estimates whether their view of the company has changed or if there are any new concerns to be aware of. Readers will be glad to know we've aggregated the latest statutory forecasts to see whether the analysts have changed their mind on Zhihu after the latest results.
Check out our latest analysis for Zhihu
Taking into account the latest results, the current consensus, from the eight analysts covering Zhihu, is for revenues of CN¥3.76b in 2024. This implies a definite 11% reduction in Zhihu's revenue over the past 12 months. The loss per share is expected to greatly reduce in the near future, narrowing 37% to CN¥0.90. Before this latest report, the consensus had been expecting revenues of CN¥4.90b and CN¥0.70 per share in losses. There's been a definite change in sentiment in this update, with the analysts administering a notable cut to next year's revenue estimates, while at the same time increasing their loss per share forecasts.
The consensus price target fell 15% to US$1.39, with the analysts clearly concerned about the company following the weaker revenue and earnings outlook. 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 Zhihu analyst has a price target of US$2.17 per share, while the most pessimistic values it at US$0.71. The narrow spread of estimates could suggest that the business' future is relatively easy to value, or thatthe analysts have a strong view on its prospects.
One way to get more context on these forecasts is to look at how they compare to both past performance, and how other companies in the same industry are performing. These estimates imply that revenue is expected to slow, with a forecast annualised decline of 11% by the end of 2024. This indicates a significant reduction from annual 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 note is the forecast of increased losses next year, suggesting all may not be well at Zhihu. On the negative side, they also downgraded their revenue estimates, and forecasts imply they will perform worse than the wider industry. The consensus price target fell measurably, with the analysts seemingly not reassured by the latest results, leading to a lower estimate of Zhihu's future valuation.
With that in mind, we wouldn't be too quick to come to a conclusion on Zhihu. Long-term earnings power is much more important than next year's profits. We have forecasts for Zhihu going out to 2026, and you can see them free on our platform here.
Another thing to consider is whether management and directors have been buying or selling stock recently. We provide an overview of all open market stock trades for the last twelve months on our platform, here.
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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.
