Today is shaping up negative for Sundial Growers Inc. (NASDAQ:SNDL) shareholders, with the analysts delivering a substantial negative revision to next year's forecasts. Revenue estimates were cut sharply as analysts signalled a weaker outlook - perhaps a sign that investors should temper their expectations as well.
After this downgrade, Sundial Growers' five analysts are now forecasting revenues of CA$89m in 2021. This would be a decent 20% improvement in sales compared to the last 12 months. Prior to the latest estimates, the analysts were forecasting revenues of CA$106m in 2021. It looks like forecasts have become a fair bit less optimistic on Sundial Growers, given the measurable cut to revenue estimates.
The consensus price target fell 43% to CA$0.40, with the analysts clearly less optimistic about Sundial Growers' valuation following this update. 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. Currently, the most bullish analyst values Sundial Growers at CA$1.01 per share, while the most bearish prices it at CA$0.20. As you can see the range of estimates is wide, with the lowest valuation coming in at less than half the most bullish estimate, suggesting there are some strongly diverging views on how think this business will perform. 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. It's pretty clear that there is an expectation that Sundial Growers' revenue growth will slow down substantially, with revenues next year expected to grow 20%, compared to a historical growth rate of 52% over the past year. By way of comparison, the other companies in this industry with analyst coverage are forecast to grow their revenue at 6.5% next year. Even after the forecast slowdown in growth, it seems obvious that Sundial Growers is also expected to grow faster than the wider industry.
The Bottom Line
The clear low-light was that analysts slashing their revenue forecasts for Sundial Growers next year. Analysts also expect revenues to grow faster than the wider market. The consensus price target fell measurably, with analysts seemingly not reassured by recent business developments, leading to a lower estimate of Sundial Growers' future valuation. Given the stark change in sentiment, we'd understand if investors became more cautious on Sundial Growers after today.
So things certainly aren't looking great, and you should also know that we've spotted some potential warning signs with Sundial Growers, including major dilution from new stock issuance in the past year. For more information, you can click here to discover this and the 3 other warning signs we've identified.
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.
This article by Simply Wall St is general in nature. 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.
Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team@simplywallst.com.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
