AXT, Inc. (NASDAQ:AXTI) investors will be delighted, with the company turning in some strong numbers with its latest results. Revenues and losses per share were both better than expected, with revenues of US$21m leading estimates by 7.0%. Statutory losses were smaller than the analystsexpected, coming in at US$0.01 per share. Following the result, the 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. With this in mind, we've gathered the latest statutory forecasts to see what the analysts are expecting for next year.
Taking into account the latest results, the consensus forecast from AXT's four analysts is for revenues of US$91.2m in 2020, which would reflect a decent 8.8% improvement in sales compared to the last 12 months. AXT is also expected to turn profitable, with statutory earnings of US$0.024 per share. Before this latest report, the consensus had been expecting revenues of US$89.5m and US$0.035 per share in losses. Although we saw no serious change to the revenue outlook, the analysts have definitely increased their earnings estimates, estimating a profit next year, compared to previous forecasts of a loss. So it seems like the consensus has become substantially more bullish on AXT.
The analysts have been lifting their price targets on the back of the earnings upgrade, with the consensus price target rising 7.7% to US$6.98. 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. Currently, the most bullish analyst values AXT at US$10.00 per share, while the most bearish prices it at US$5.90. 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.
These estimates are interesting, but it can be useful to paint some more broad strokes when seeing how forecasts compare, both to the AXT's past performance and to peers in the same industry. It's clear from the latest estimates that AXT's rate of growth is expected to accelerate meaningfully, with the forecast 8.8% revenue growth noticeably faster than its historical growth of 4.0%p.a. over the past five years. Compare this with other companies in the same industry, which are forecast to grow their revenue 8.7% next year. Factoring in the forecast acceleration in revenue, it's pretty clear that AXT is expected to grow at about the same rate as the wider industry.
The Bottom Line
The most important thing to take away is that there's been a clear step-change in belief around the business' prospects, with the analysts now expecting AXT to become profitable next year. They also reconfirmed their revenue estimates, with the company predicted to grow at about the same rate as the wider industry. We note an upgrade to the price target, suggesting that the analysts believes the intrinsic value of the business is likely to improve over time.
With that in mind, we wouldn't be too quick to come to a conclusion on AXT. Long-term earnings power is much more important than next year's profits. At Simply Wall St, we have a full range of analyst estimates for AXT going out to 2021, and you can see them free on our platform here..
It is also worth noting that we have found 1 warning sign for AXT that you need to take into consideration.
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