Yahoo Finance One Lizhi Inc. (NASDAQ:LIZI) Analyst Just Slashed Their Estimates By A Substantial 11%
The analyst covering Lizhi Inc. (NASDAQ:LIZI) delivered a dose of negativity to shareholders today, by making a substantial revision to their statutory forecasts for this year. Revenue estimates were cut sharply as the analyst signalled a weaker outlook - perhaps a sign that investors should temper their expectations as well.
Following the downgrade, the latest consensus from Lizhi's sole analyst is for revenues of CN¥1.6b in 2020, which would reflect a major 36% improvement in sales compared to the last 12 months. Before the latest update, the analyst was foreseeing CN¥1.8b of revenue in 2020. It looks like forecasts have become a fair bit less optimistic on Lizhi, given the substantial drop in revenue estimates.
View our latest analysis for Lizhi
We'd point out that there was no major changes to their price target of CN¥74.60, suggesting the latest estimates were not enough to shift their view on the value of the business. It could also be instructive to look at the range of analyst estimates, to evaluate how different the outlier opinions are from the mean. Currently, the most bullish analyst values Lizhi at CN¥11.98 per share, while the most bearish prices it at CN¥8.95. Even so, with a relatively close grouping of estimates, it looks like the analyst is quite confident in their valuations, suggesting Lizhi is an easy business to forecast or the underlying assumptions are obvious.
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 Lizhi's revenue growth is expected to slow, with forecast 36% increase next year well below the historical 48% growth over the last year. By way of comparison, the other companies in this industry with analyst coverage are forecast to grow their revenue at 13% next year. Even after the forecast slowdown in growth, it seems obvious that Lizhi is also expected to grow faster than the wider industry.
The Bottom Line
The most important thing to take away is that the analyst cut their revenue estimates for this year. The analyst also expects revenues to grow faster than the wider market. Often, one downgrade can set off a daisy-chain of cuts, especially if an industry is in decline. So we wouldn't be surprised if the market became a lot more cautious on Lizhi after today.
As you can see, this broker clearly isn't bullish, and there might be good reason for that. We've identified some potential issues with Lizhi's financials, such as a short cash runway. For more information, you can click here to discover this and the 1 other warning sign we've identified.
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