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Analysts Have Just Cut Their Waterdrop Inc. (NYSE:WDH) Revenue Estimates By 14%

Today is shaping up negative for Waterdrop Inc. (NYSE:WDH) 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.

Following the downgrade, the latest consensus from Waterdrop's five analysts is for revenues of CN¥4.7b in 2022, which would reflect a substantial 38% improvement in sales compared to the last 12 months. Before the latest update, the analysts were foreseeing CN¥5.5b of revenue in 2022. The consensus view seems to have become more pessimistic on Waterdrop, noting the substantial drop in revenue estimates in this update.

Check out our latest analysis for Waterdrop

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earnings-and-revenue-growth

Notably, the analysts have cut their price target 24% to CN¥30.47, suggesting concerns around Waterdrop's valuation. There's another way to think about price targets though, and that's to look at the range of price targets put forward by analysts, because a wide range of estimates could suggest a diverse view on possible outcomes for the business. Currently, the most bullish analyst values Waterdrop at CN¥8.79 per share, while the most bearish prices it at CN¥1.76. The narrow spread of estimates could suggest that the business' future is relatively easy to value, or that the analysts have a clear view on its prospects.

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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. We would highlight that Waterdrop's revenue growth is expected to slow, with the forecast 30% annualised growth rate until the end of 2022 being well below the historical 50% p.a. growth over the last three years. By way of comparison, the other companies in this industry with analyst coverage are forecast to grow their revenue at 3.9% annually. Even after the forecast slowdown in growth, it seems obvious that Waterdrop is also expected to grow faster than the wider industry.

The Bottom Line

The most important thing to take away is that analysts cut their revenue estimates for next year. They're also forecasting more rapid revenue growth 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 Waterdrop's future valuation. Overall, given the drastic downgrade to next year's forecasts, we'd be feeling a little more wary of Waterdrop going forwards.

Need some more information? We have estimates for Waterdrop from its five analysts out until 2024, and you can see them free on our platform here.

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.

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.