The analysts covering First Internet Bancorp (NASDAQ:INBK) delivered a dose of negativity to shareholders today, by making a substantial revision to their statutory forecasts for this year. Both revenue and earnings per share (EPS) estimates were cut sharply as the analysts factored in the latest outlook for the business, concluding that they were too optimistic previously. Shares are up 8.5% to US$15.49 in the past week. It will be interesting to see if this downgrade motivates investors to start selling their holdings.
Following the downgrade, the consensus from five analysts covering First Internet Bancorp is for revenues of US$72m in 2020, implying a small 5.3% decline in sales compared to the last 12 months. Statutory earnings per share are anticipated to plummet 32% to US$1.76 in the same period. Before this latest update, the analysts had been forecasting revenues of US$80m and earnings per share (EPS) of US$2.02 in 2020. It looks like analyst sentiment has declined substantially, with a measurable cut to revenue estimates and a real cut to earnings per share numbers as well.
The consensus price target fell 8.6% to US$21.20, with the weaker earnings outlook clearly leading analyst valuation estimates. 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. The most optimistic First Internet Bancorp analyst has a price target of US$30.00 per share, while the most pessimistic values it at US$16.00. This is a fairly broad spread of estimates, suggesting that the analysts are forecasting a wide range of possible outcomes for the business.
These estimates are interesting, but it can be useful to paint some more broad strokes when seeing how forecasts compare, both to the First Internet Bancorp's past performance and to peers in the same industry. These estimates imply that sales are expected to slow, with a forecast revenue decline of 5.3%, a significant reduction from annual growth of 16% over the last five years. Compare this with our data, which suggests that other companies in the same industry are, in aggregate, expected to see their revenue grow 2.8% next year. It's pretty clear that First Internet Bancorp's revenues are expected to perform substantially worse than the wider industry.
The Bottom Line
The biggest issue in the new estimates is that analysts have reduced their earnings per share estimates, suggesting business headwinds lay ahead for First Internet Bancorp. Regrettably, they also downgraded their revenue estimates, and the latest forecasts imply the business will grow sales slower than the wider market. Given the scope of the downgrades, it would not be a surprise to see the market become more wary of the business.
Still, the long-term prospects of the business are much more relevant than next year's earnings. We have estimates - from multiple First Internet Bancorp analysts - going out to 2021, and you can see them free on our platform here.
Of course, seeing company management invest large sums of money in a stock can be just as useful as knowing whether analysts are downgrading their estimates. So you may also wish to search this free list of stocks that insiders are buying.
If you spot an error that warrants correction, please contact the editor at email@example.com. 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. Simply Wall St has no position in the stocks mentioned.
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