Last week, you might have seen that Sierra Wireless, Inc. (TSE:SW) released its annual result to the market. The early response was not positive, with shares down 6.8% to CA$12.04 in the past week. Sierra Wireless reported revenues of US$714m, in line with expectations, but it unfortunately also reported (statutory) losses of US$1.95 per share, which were slightly larger than expected. Following the result, 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. We thought readers would find it interesting to see analysts' latest (statutory) post-earnings forecasts for next year.
Following the recent earnings report, the consensus fromten analysts covering Sierra Wireless expects revenues of US$697.3m in 2020, implying a noticeable 2.3% decline in sales compared to the last 12 months. Statutory losses are forecast to balloon 46% to US$1.05 per share. Before this earnings announcement, analysts had been forecasting revenues of US$718.6m and losses of US$0.54 per share in 2020. From this we can that analyst sentiment has definitely become more bearish after the latest results, leading to lower revenue forecasts and a pretty serious reduction to earnings per share estimates.
The average analyst price target lifted 18% to US$14.00, clearly signalling that the weaker revenue and EPS outlook are not expected to weigh on the stock over the longer term. 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. The most optimistic Sierra Wireless analyst has a price target of US$14.00 per share, while the most pessimistic values it at US$14.00. Still, with such a tight range of estimates, it suggests analysts have a pretty good idea of what they think the company is worth.
It can also be useful to step back and take a broader view of how analyst forecasts compare to Sierra Wireless's performance in recent years. These estimates imply that sales are expected to slow, with a forecast revenue decline of 2.3% a significant reduction from annual growth of 6.8% over the last five years. Compare this with our data, which suggests that other companies in the same market are, in aggregate, expected to see their revenue grow 23% next year. It's pretty clear that Sierra Wireless's revenues are expected to perform substantially worse than the wider market.
The Bottom Line
The highlight for us was that the consensus reduced its estimated losses next year, perhaps suggesting Sierra Wireless is moving incrementally towards profitability. Unfortunately, analysts also downgraded their revenue estimates, and our data indicates revenues are expected to perform worse than the wider market. Even so, earnings per share are more important to the intrinsic value of the business. Analysts also upgraded their price target, suggesting that analysts believe the intrinsic value of the business is likely to improve over time.
With that said, the long-term trajectory of the company's earnings is a lot more important than next year. We have forecasts for Sierra Wireless going out to 2021, and you can see them free on our platform here.
We also provide an overview of the Sierra Wireless Board and CEO remuneration and length of tenure at the company, and whether insiders have been buying the stock, here.
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