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Megaport Limited (ASX:MP1) missed earnings with its latest half-yearly results, disappointing overly-optimistic forecasters. It was a pretty negative result overall, with revenues of AU$36m missing analyst predictions by 2.2%. Worse, the business reported a statutory loss of AU$0.25 per share, much larger than the analysts had forecast prior to the result. This is an important time for investors, as they can track a company's performance in its report, look at what experts are forecasting for next year, and see if there has been any change to expectations for the business. Readers will be glad to know we've aggregated the latest statutory forecasts to see whether the analysts have changed their mind on Megaport after the latest results.
Following the latest results, Megaport's ten analysts are now forecasting revenues of AU$79.9m in 2021. This would be a meaningful 17% improvement in sales compared to the last 12 months. Losses are predicted to fall substantially, shrinking 31% to AU$0.30. Before this latest report, the consensus had been expecting revenues of AU$81.9m and AU$0.22 per share in losses. While this year's revenue estimates dropped there was also a very substantial increase in loss per share expectations, suggesting the consensus has a bit of a mixed view on the stock.
The average price target was broadly unchanged at AU$16.31, perhaps implicitly signalling that the weaker earnings outlook is not expected to have a long-term impact on the valuation. The consensus price target is just an average of individual analyst targets, so - it could be handy to see how wide the range of underlying estimates is. The most optimistic Megaport analyst has a price target of AU$19.00 per share, while the most pessimistic values it at AU$13.27. This shows there is still a bit of diversity in estimates, but analysts don't appear to be totally split on the stock as though it might be a success or failure situation.
Taking a look at the bigger picture now, one of the ways we can understand these forecasts is to see how they compare to both past performance and industry growth estimates. We would highlight that Megaport's revenue growth is expected to slow, with forecast 17% increase next year well below the historical 48%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 25% per year. So it's pretty clear that, while revenue growth is expected to slow down, the wider industry is also expected to grow faster than Megaport.
The Bottom Line
The most important thing to note is the forecast of increased losses next year, suggesting all may not be well at Megaport. Unfortunately, they also downgraded their revenue estimates, and our data indicates revenues are expected to perform worse than the wider industry. Even so, earnings per share are more important to the intrinsic value of the business. The consensus price target held steady at AU$16.31, with the latest estimates not enough to have an impact on their price targets.
With that in mind, we wouldn't be too quick to come to a conclusion on Megaport. Long-term earnings power is much more important than next year's profits. We have estimates - from multiple Megaport analysts - going out to 2025, and you can see them free on our platform here.
That said, it's still necessary to consider the ever-present spectre of investment risk. We've identified 1 warning sign with Megaport , and understanding this should be part of your investment process.
This article by Simply Wall St is general in nature. 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.
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