News Flash: 2 Analysts Think Canaan Inc. (NASDAQ:CAN) Earnings Are Under Threat

Today is shaping up negative for Canaan Inc. (NASDAQ:CAN) shareholders, with the analysts delivering a substantial negative revision to this year's forecasts. Both revenue and earnings per share (EPS) estimates were cut sharply as analysts factored in the latest outlook for the business, concluding that they were too optimistic previously.

Following the latest downgrade, the twin analysts covering Canaan provided consensus estimates of CN¥3.3b revenue in 2023, which would reflect a substantial 24% decline on its sales over the past 12 months. Statutory earnings per share are anticipated to tumble 29% to CN¥2.80 in the same period. Before this latest update, the analysts had been forecasting revenues of CN¥4.3b and earnings per share (EPS) of CN¥7.97 in 2023. It looks like analyst sentiment has declined substantially, with a pretty serious reduction to revenue estimates and a large cut to earnings per share numbers as well.

See our latest analysis for Canaan

It'll come as no surprise then, to learn that the analysts have cut their price target 12% to CN¥45.46. That's not the only conclusion we can draw from this data however, as some investors also like to consider the spread in estimates when evaluating analyst price targets. The most optimistic Canaan analyst has a price target of CN¥9.11 per share, while the most pessimistic values it at CN¥3.99. Still, with such a tight range of estimates, it suggests the analysts have a pretty good idea of what they think the company is worth.

One way to get more context on these forecasts is to look at how they compare to both past performance, and how other companies in the same industry are performing. These estimates imply that sales are expected to slow, with a forecast annualised revenue decline of 24% by the end of 2023. This indicates a significant reduction from annual growth of 38% 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 6.4% annually for the foreseeable future. It's pretty clear that Canaan's revenues are expected to perform substantially worse than the wider industry.

The Bottom Line

The most important thing to take away is that analysts cut their earnings per share estimates, expecting a clear decline in business conditions. Regrettably, they also downgraded their revenue estimates, and the latest forecasts imply the business will grow sales slower than the wider market. After such a stark change in sentiment from analysts, we'd understand if readers now felt a bit wary of Canaan.

Even so, the longer term trajectory of the business is much more important for the value creation of shareholders. At least one analyst has provided forecasts out to 2024, which can be seen 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.

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.

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