The latest analyst coverage could presage a bad day for The Lion Electric Company (TSE:LEV), with the analysts making across-the-board cuts to their statutory estimates that might leave shareholders a little shell-shocked. This report focused on revenue estimates, and it looks as though the consensus view of the business has become substantially more conservative.

Following the downgrade, the most recent consensus for Lion Electric from its eight analysts is for revenues of US$256m in 2025 which, if met, would be a notable 13% increase on its sales over the past 12 months. The loss per share is anticipated to greatly reduce in the near future, narrowing 47% to US$0.27. Yet before this consensus update, the analysts had been forecasting revenues of US$288m and losses of US$0.26 per share in 2025. Ergo, there's been a clear change in sentiment, with the analysts administering a notable cut to next year's revenue estimates, while at the same time increasing their loss per share forecasts.

See our latest analysis for Lion Electric

The consensus price target fell 20% to US$1.00, with the analysts clearly concerned about the company following the weaker revenue and earnings outlook. 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. There are some variant perceptions on Lion Electric, with the most bullish analyst valuing it at US$1.00 and the most bearish at US$1.00 per share. With such a narrow range of valuations, analysts apparently share similar views on what they think the business 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. We would highlight that Lion Electric's revenue growth is expected to slow, with the forecast 10% annualised growth rate until the end of 2025 being well below the historical 56% p.a. growth over the last three years. Compare this to the 23 other companies in this industry with analyst coverage, which are forecast to grow their revenue at 8.5% per year. Factoring in the forecast slowdown in growth, it looks like Lion Electric is forecast to grow at about the same rate as the wider industry.

The Bottom Line

The most important thing to note from this downgrade is that the consensus increased its forecast losses next year, suggesting all may not be well at Lion Electric. Lamentably, they also downgraded their sales forecasts, but the business is still expected to grow at roughly the same rate as the market itself. Furthermore, there was a cut to the price target, suggesting that the latest news has led to more pessimism about the intrinsic value of the business. Often, one downgrade can set off a daisy-chain of cuts, especially if an industry is in decline. So we wouldn't be surprised if the market became a lot more cautious on Lion Electric after today.

So things certainly aren't looking great, and you should also know that we've spotted some potential warning signs with Lion Electric, including a short cash runway. For more information, you can click here to discover this and the 2 other warning signs we've identified.

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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.