The latest analyst coverage could presage a bad day for Red Cat Holdings, Inc. (NASDAQ:RCAT), with the covering analyst making across-the-board cuts to their statutory estimates that might leave shareholders a little shell-shocked. Both revenue and earnings per share (EPS) estimates were cut sharply as the analyst 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$8.15 reflecting a 12% rise in the past week. Whether the downgrade will have a negative impact on demand for shares is yet to be seen.

After this downgrade, Red Cat Holdings' solo analyst is now forecasting revenues of US$25m in 2025. This would be a major 50% improvement in sales compared to the last 12 months. Per-share losses are expected to creep up to US$0.50. Yet before this consensus update, the analyst had been forecasting revenues of US$59m and losses of US$0.39 per share in 2025. So there's been quite a change-up of views after the recent consensus updates, with the analyst making a serious cut to their revenue forecasts while also expecting losses per share to increase.

The consensus price target lifted 29% to US$13.50, clearly signalling that the weaker revenue and EPS outlook are not expected to weigh on the stock over the longer term.

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. The analyst is definitely expecting Red Cat Holdings' growth to accelerate, with the forecast 126% annualised growth to the end of 2025 ranking favourably alongside historical growth of 47% per annum over the past five years. By contrast, our data suggests that other companies (with analyst coverage) in a similar industry are forecast to grow their revenue at 7.4% per year. It seems obvious that, while the growth outlook is brighter than the recent past, the analyst also expect Red Cat Holdings to grow faster than the wider industry.

The Bottom Line

The most important thing to take away is that the analyst increased their loss per share estimates for this year. Unfortunately, the analyst also downgraded their revenue estimates, although our data indicates revenues are expected to perform better than the wider market. The rising price target is a puzzle, but still - with a serious cut to this year's outlook, we wouldn't be surprised if investors were a bit wary of Red Cat Holdings.

After a downgrade like this, it's pretty clear that previous forecasts were too optimistic. What's more, we've spotted several possible issues with Red Cat Holdings' business, like dilutive stock issuance over the past year. Learn more, and discover the 1 other concern 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 with high insider ownership.

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