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Lufax Holding Ltd (NYSE:LU) Analysts Are Reducing Their Forecasts For This Year

Market forces rained on the parade of Lufax Holding Ltd (NYSE:LU) shareholders today, when the analysts downgraded their forecasts for this year. Revenue and earnings per share (EPS) forecasts were both revised downwards, with analysts seeing grey clouds on the horizon. Investors however, have been notably more optimistic about Lufax Holding recently, with the stock price up an unbelievable 54% to US$4.48 in the past week. With such a sharp increase, it seems brokers may have seen something that is not yet being priced in by the wider market.

Following the latest downgrade, the nine analysts covering Lufax Holding provided consensus estimates of CN¥30b revenue in 2024, which would reflect a disturbing 40% decline on its sales over the past 12 months. Per-share earnings are expected to leap 176% to CN¥4.41. Prior to this update, the analysts had been forecasting revenues of CN¥35b and earnings per share (EPS) of CN¥5.21 in 2024. It looks like analyst sentiment has declined substantially, with a substantial drop in revenue estimates and a real cut to earnings per share numbers as well.

Check out our latest analysis for Lufax Holding

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earnings-and-revenue-growth

What's most unexpected is that the consensus price target rose 7.3% to CN¥30.86, strongly implying the downgrade to forecasts is not expected to be more than a temporary blip. 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. There are some variant perceptions on Lufax Holding, with the most bullish analyst valuing it at CN¥44.24 and the most bearish at CN¥19.99 per share. This is a fairly broad spread of estimates, suggesting that the analysts are forecasting a wide range of possible outcomes for the business.

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These estimates are interesting, but it can be useful to paint some more broad strokes when seeing how forecasts compare, both to the Lufax Holding's past performance and to peers in the same industry. These estimates imply that sales are expected to slow, with a forecast annualised revenue decline of 40% by the end of 2024. This indicates a significant reduction from annual growth of 6.6% over the last five years. Compare this with our data, which suggests that other companies in the same industry are, in aggregate, expected to see their revenue grow 12% per year. So although its revenues are forecast to shrink, this cloud does not come with a silver lining - Lufax Holding is expected to lag the wider industry.

The Bottom Line

The biggest issue in the new estimates is that analysts have reduced their earnings per share estimates, suggesting business headwinds lay ahead for Lufax Holding. Regrettably, they also downgraded their revenue estimates, and the latest forecasts imply the business will grow sales slower than the wider market. The increasing price target is not intuitively what we would expect to see, given these downgrades, and we'd suggest shareholders revisit their investment thesis before making a decision.

So things certainly aren't looking great, and you should also know that we've spotted some potential warning signs with Lufax Holding, including its declining profit margins. Learn more, and discover the 3 other concerns we've identified, for free on our platform here.

Another way to search for interesting companies that could be reaching an inflection point is to track whether management are buying or selling, with our free list of growing companies that insiders are buying.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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.