SkyWater Technology, Inc. (NASDAQ:SKYT) Analysts Are Reducing Their Forecasts For This Year

The analysts covering SkyWater Technology, Inc. (NASDAQ:SKYT) delivered a dose of negativity to shareholders today, by making a substantial revision to their statutory forecasts for this year. 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. Bidders are definitely seeing a different story, with the stock price of US$22.24 reflecting a 29% rise in the past week. It will be interesting to see if the downgrade has an impact on buying demand for the company's shares.

After this downgrade, SkyWater Technology's four analysts are now forecasting revenues of US$176m in 2021. This would be a notable 8.7% improvement in sales compared to the last 12 months. Losses are expected to increase substantially, hitting US$0.73 per share. Yet before this consensus update, the analysts had been forecasting revenues of US$211m and losses of US$0.52 per share in 2021. Ergo, there's been a clear change in sentiment, with the analysts administering a notable cut to this year's revenue estimates, while at the same time increasing their loss per share forecasts.

View our latest analysis for SkyWater Technology

The consensus price target fell 13% to US$26.25, implicitly signalling that lower earnings per share are a leading indicator for SkyWater Technology's valuation. Fixating on a single price target can be unwise though, since the consensus target is effectively the average of analyst price targets. As a result, some investors like to look at the range of estimates to see if there are any diverging opinions on the company's valuation. Currently, the most bullish analyst values SkyWater Technology at US$32.00 per share, while the most bearish prices it at US$23.00. Analysts definitely have varying views on the business, but the spread of estimates is not wide enough in our view to suggest that extreme outcomes could await SkyWater Technology shareholders.

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Of course, another way to look at these forecasts is to place them into context against the industry itself. The period to the end of 2021 brings more of the same, according to the analysts, with revenue forecast to display 18% growth on an annualised basis. That is in line with its 22% annual growth over the past year. Compare this with the broader industry, which analyst estimates (in aggregate) suggest will see revenues grow 8.4% annually. So although SkyWater Technology is expected to maintain its revenue growth rate, it's definitely expected to grow faster than the wider industry.

The Bottom Line

The most important thing to take away is that analysts increased their loss per share estimates for this year. While analysts did downgrade their revenue estimates, these forecasts still imply revenues will perform better than the wider market. Given the scope of the downgrades, it would not be a surprise to see the market become more wary of the business.

Even so, the longer term trajectory of the business is much more important for the value creation of shareholders. We have estimates - from multiple SkyWater Technology analysts - going out to 2023, and you can see them 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.

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.

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