Today is shaping up negative for Nautilus, Inc. (NYSE:NLS) shareholders, with the analysts delivering a substantial negative revision to next year's forecasts. Revenue estimates were cut sharply as the analysts signalled a weaker outlook - perhaps a sign that investors should temper their expectations as well. Investors however, have been notably more optimistic about Nautilus recently, with the stock price up a notable 19% to US$5.58 in the past week. It will be interesting to see if the downgrade has an impact on buying demand for the company's shares.
Following the downgrade, the consensus from five analysts covering Nautilus is for revenues of US$519m in 2023, implying a painful 22% decline in sales compared to the last 12 months. Following this this downgrade, earnings are now expected to tip over into loss-making territory, with the analysts forecasting losses of US$0.40 per share in 2023. Yet before this consensus update, the analysts had been forecasting revenues of US$583m and losses of US$0.37 per share in 2023. Ergo, there's been a clear change in sentiment, 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 10.0% to US$11.25, implicitly signalling that lower earnings per share are a leading indicator for Nautilus' valuation. 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 Nautilus at US$15.00 per share, while the most bearish prices it at US$7.00. This is a fairly broad spread of estimates, suggesting that the analysts are forecasting a wide range of possible outcomes for the business.
Of course, another way to look at these forecasts is to place them into context against the industry itself. We would highlight that sales are expected to reverse, with a forecast 18% annualised revenue decline to the end of 2023. That is a notable change from historical growth of 4.5% over the last five years. By contrast, our data suggests that other companies (with analyst coverage) in the same industry are forecast to see their revenue grow 8.2% annually for the foreseeable future. It's pretty clear that Nautilus' revenues are expected to perform substantially worse than the wider industry.
The Bottom Line
The most important thing to take away is that analysts increased their loss per share estimates for next year. Regrettably, they also downgraded their revenue estimates, and the latest forecasts imply the business will grow sales slower 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 Nautilus' future valuation. 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 Nautilus after today.
So things certainly aren't looking great, and you should also know that we've spotted some potential warning signs with Nautilus, including dilutive stock issuance over the past year. Learn more, and discover the 2 other warning signs we've identified, for free on our platform here.
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