It's been a mediocre week for Internap Corporation (NASDAQ:INAP) shareholders, with the stock dropping 12% to US$1.99 in the week since its latest quarterly results. Revenues of US$73m arrived in line with expectations, although losses per share were US$1.01, an impressive 25% smaller than what broker models predicted. Analysts typically update their forecasts at each earnings report, and we can judge from their estimates whether their view of the company has changed or if there are any new concerns to be aware of. With this in mind, we've gathered the latest forecasts to see what analysts are expecting for next year.
Taking into account the latest results, Internap's five analysts currently expect revenues in 2020 to be US$296.3m, approximately in line with the last 12 months. Per-share losses are expected to see a sharp uptick, reaching US$2.81. Before this earnings announcement, analysts had been forecasting revenues of US$310.3m and losses of US$2.39 per share in 2020. Analysts seem less optimistic after the recent results, reducing their sales forecasts and making a real cut to earnings per share forecasts.
The consensus price target fell 33% to US$5.83, with analysts clearly concerned about the company following the weaker revenue and earnings outlook. Fixating on a single price target can be unwise though, since the consensus target is effectively the average of analyst price targets. As a result, some investors like to look at the range of estimates to see if there are any diverging opinions on the company's valuation. The most optimistic Internap analyst has a price target of US$7.50 per share, while the most pessimistic values it at US$5.00. As you can see, analysts are not all in agreement on the stock's future, but the range of estimates is still reasonably narrow, which could suggest that the outcome is not totally unpredictable.
It can be useful to take a broader overview by seeing how analyst forecasts compare, both to the Internap's past performance and to peers in the same market. Over the past five years, revenues have declined around 2.0% annually. On the bright side, analysts expect the decline to level off somewhat, with the forecast for a 0.5% decline in revenue next year. Compare this against analyst estimates for companies in the wider market, which suggest that revenues (in aggregate) are expected to decline 11% next year. So it's pretty clear that, while it does have declining revenues, at least analysts expect Internap to suffer less severely than the wider market.
The Bottom Line
The highlight for us was that the consensus reduced its estimated losses next year, perhaps suggesting Internap is moving incrementally towards profitability. On the negative side, they also downgraded their revenue estimates, and forecasts imply revenues will perform worse than the wider market. The consensus price target fell measurably, with analysts seemingly not reassured by the latest results, leading to a lower estimate of Internap's future valuation.
Even so, the longer term trajectory of the business is much more important for the value creation of shareholders. We have forecasts for Internap going out to 2021, and you can see them free on our platform here.
It might also be worth considering whether Internap's debt load is appropriate, using our debt analysis tools on the Simply Wall St platform, here.
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