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The latest analyst coverage could presage a bad day for Daqo New Energy Corp. (NYSE:DQ), with the analysts 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 analysts factored in the latest outlook for the business, concluding that they were too optimistic previously.
Following the latest downgrade, the current consensus, from the nine analysts covering Daqo New Energy, is for revenues of US$941m in 2025, which would reflect a not inconsiderable 8.6% reduction in Daqo New Energy's sales over the past 12 months. Losses are predicted to fall substantially, shrinking 55% to US$2.37 per share. Yet prior to the latest estimates, the analysts had been forecasting revenues of US$1.5b and losses of US$1.79 per share in 2025. So there's been quite a change-up of views after the recent consensus updates, with the analysts making a serious cut to their revenue forecasts while also expecting losses per share to increase.
See our latest analysis for Daqo New Energy
The consensus price target was broadly unchanged at US$25.14, perhaps implicitly signalling that the weaker earnings outlook is not expected to have a long-term impact on the valuation.
These estimates are interesting, but it can be useful to paint some more broad strokes when seeing how forecasts compare, both to the Daqo New Energy's past performance and to peers in the same industry. We would highlight that sales are expected to reverse, with a forecast 8.6% annualised revenue decline to the end of 2025. That is a notable change from historical growth of 21% 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 16% annually for the foreseeable future. So although its revenues are forecast to shrink, this cloud does not come with a silver lining - Daqo New Energy is expected to lag the wider industry.
The Bottom Line
The most important thing to note from this downgrade is that the consensus increased its forecast losses this year, suggesting all may not be well at Daqo New Energy. Regrettably, they also downgraded their revenue estimates, and the latest forecasts imply the business will grow sales slower than the wider market. We're also surprised to see that the price target went unchanged. Still, deteriorating business conditions (assuming accurate forecasts!) can be a leading indicator for the stock price, so we wouldn't blame investors for being more cautious on Daqo New Energy after the downgrade.