Zhihu Inc. (NYSE:ZH) Just Reported And Analysts Have Been Cutting Their Estimates

Zhihu Technology Ltd -1.35%

Zhihu Technology Ltd




Shareholders might have noticed that Zhihu Inc. (NYSE:ZH) filed its full-year result this time last week. The early response was not positive, with shares down 3.7% to US$0.68 in the past week. It was a respectable set of results; while revenues of CN¥4.2b were in line with analyst predictions, statutory losses were 12% smaller than expected, with Zhihu losing CN¥1.41 per share. Following the result, the analysts have updated their earnings model, and it would be good to know whether they think there's been a strong change in the company's prospects, or if it's business as usual. So we collected the latest post-earnings statutory consensus estimates to see what could be in store for next year.

See our latest analysis for Zhihu

NYSE:ZH Earnings and Revenue Growth March 30th 2024

Following the recent earnings report, the consensus from eight analysts covering Zhihu is for revenues of CN¥3.76b in 2024. This implies a not inconsiderable 11% decline in revenue compared to the last 12 months. The loss per share is expected to greatly reduce in the near future, narrowing 37% to CN¥0.90. Before this earnings announcement, the analysts had been modelling revenues of CN¥4.90b and losses of CN¥0.70 per share in 2024. There's been a definite change in sentiment in this update, with the analysts administering a notable cut to next year's revenue estimates, while at the same time increasing their loss per share forecasts.

The average price target fell 15% to US$1.39, implicitly signalling that lower earnings per share are a leading indicator for Zhihu's valuation. That's not the only conclusion we can draw from this data however, as some investors also like to consider the spread in estimates when evaluating analyst price targets. Currently, the most bullish analyst values Zhihu at US$2.17 per share, while the most bearish prices it at US$0.71. The narrow spread of estimates could suggest that the business' future is relatively easy to value, or thatthe analysts have a strong view on its prospects.

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. These estimates imply that revenue is expected to slow, with a forecast annualised decline of 11% by the end of 2024. This indicates a significant reduction from annual growth of 31% over the last three years. By contrast, our data suggests that other companies (with analyst coverage) in the same industry are forecast to see their revenue grow 9.9% annually for the foreseeable future. It's pretty clear that Zhihu's revenues are expected to perform substantially worse than the wider industry.

The Bottom Line

The most important thing to take away is that the analysts increased their loss per share estimates for next year. On the negative side, they also downgraded their revenue estimates, and forecasts imply they will perform worse than the wider industry. The consensus price target fell measurably, with the analysts seemingly not reassured by the latest results, leading to a lower estimate of Zhihu's future valuation.

With that in mind, we wouldn't be too quick to come to a conclusion on Zhihu. Long-term earnings power is much more important than next year's profits. We have estimates - from multiple Zhihu analysts - going out to 2026, and you can see them free on our platform here.

We also provide an overview of the Zhihu Board and CEO remuneration and length of tenure at the company, and whether insiders have been buying the stock, here.

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