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Celebrations may be in order for Silicon Motion Technology Corporation (NASDAQ:SIMO) shareholders, with the analysts delivering a significant upgrade to their statutory estimates for the company. The consensus statutory numbers for both revenue and earnings per share (EPS) increased, with their view clearly much more bullish on the company's business prospects. Silicon Motion Technology has also found favour with investors, with the stock up an extraordinary 31% to US$80.90 over the past week. Could this upgrade be enough to drive the stock even higher?
Following the upgrade, the most recent consensus for Silicon Motion Technology from its eleven analysts is for revenues of US$903m in 2021 which, if met, would be a huge 34% increase on its sales over the past 12 months. Per-share earnings are expected to leap 74% to US$5.49. Prior to this update, the analysts had been forecasting revenues of US$814m and earnings per share (EPS) of US$4.47 in 2021. So we can see there's been a pretty clear increase in analyst sentiment in recent times, with both revenues and earnings per share receiving a decent lift in the latest estimates.
It will come as no surprise to learn that the analysts have increased their price target for Silicon Motion Technology 12% to US$91.64 on the back of these upgrades. There's another way to think about price targets though, and that's to look at the range of price targets put forward by analysts, because a wide range of estimates could suggest a diverse view on possible outcomes for the business. Currently, the most bullish analyst values Silicon Motion Technology at US$120 per share, while the most bearish prices it at US$68.00. This shows there is still some 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.
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. It's clear from the latest estimates that Silicon Motion Technology's rate of growth is expected to accelerate meaningfully, with the forecast 80% annualised revenue growth to the end of 2021 noticeably faster than its historical growth of 1.6% p.a. over the past five years. Compare this with other companies in the same industry, which are forecast to grow their revenue 8.4% annually. It seems obvious that, while the growth outlook is brighter than the recent past, the analysts also expect Silicon Motion Technology to grow faster than the wider industry.
The Bottom Line
The biggest takeaway for us from these new estimates is that analysts upgraded their earnings per share estimates, with improved earnings power expected for this year. They also upgraded their revenue estimates for this year, and sales are expected to grow faster than the wider market. Given that the consensus looks almost universally bullish, with a substantial increase to forecasts and a higher price target, Silicon Motion Technology could be worth investigating further.
Even so, the longer term trajectory of the business is much more important for the value creation of shareholders. At Simply Wall St, we have a full range of analyst estimates for Silicon Motion Technology going out to 2023, and you can see them free on our platform here..
Another way to search for interesting companies that could be reaching an inflection point is to track whether management are buying or selling, with our free list of growing companies that insiders are buying.
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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