The latest analyst coverage could presage a bad day for Atomos Limited (ASX:AMS), 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 downgrade, the consensus from five analysts covering Atomos is for revenues of AU$84m in 2022, implying a discernible 2.9% decline in sales compared to the last 12 months. Statutory earnings per share are supposed to dive 92% to AU$0.001 in the same period. Prior to this update, the analysts had been forecasting revenues of AU$96m and earnings per share (EPS) of AU$0.028 in 2022. Indeed, we can see that the analysts are a lot more bearish about Atomos' prospects, administering a measurable cut to revenue estimates and slashing their EPS estimates to boot.

See our latest analysis for Atomos  earnings-and-revenue-growth

The consensus price target fell 35% to AU$1.13, with the weaker earnings outlook clearly leading analyst valuation estimates. 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 Atomos, with the most bullish analyst valuing it at AU$1.46 and the most bearish at AU$0.73 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.

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 sales are expected to reverse, with a forecast 5.7% annualised revenue decline to the end of 2022. That is a notable change from historical growth of 19% over the last three years. By contrast, our data suggests that other companies (with analyst coverage) in the same industry are forecast to see their revenue grow 8.1% annually for the foreseeable future. So although its revenues are forecast to shrink, this cloud does not come with a silver lining - Atomos 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 Atomos. Regrettably, they also downgraded their revenue estimates, and the latest forecasts imply the business will grow sales slower than the wider market. With a serious cut to this year's expectations and a falling price target, we wouldn't be surprised if investors were becoming wary of Atomos.

There might be good reason for analyst bearishness towards Atomos, like concerns around earnings quality. Learn more, and discover the 2 other risks we've identified, for 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.