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Broker Revenue Forecasts For Silicon Motion Technology Corporation (NASDAQ:SIMO) Are Surging Higher

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Shareholders in Silicon Motion Technology Corporation (NASDAQ:SIMO) may be thrilled to learn that the analysts have just delivered a major upgrade to their near-term forecasts. The analysts have sharply increased their revenue numbers, with a view that Silicon Motion Technology will make substantially more sales than they'd previously expected. The market may be pricing in some blue sky too, with the share price gaining 16% to US$56.09 in the last 7 days. Could this upgrade be enough to drive the stock even higher?

Following the upgrade, the current consensus from Silicon Motion Technology's twelve analysts is for revenues of US$679m in 2021 which - if met - would reflect a sizeable 26% increase on its sales over the past 12 months. Statutory earnings per share are presumed to expand 11% to US$3.27. Previously, the analysts had been modelling revenues of US$590m and earnings per share (EPS) of US$2.89 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.

See our latest analysis for Silicon Motion Technology

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earnings-and-revenue-growth

With these upgrades, we're not surprised to see that the analysts have lifted their price target 24% to US$67.41 per share. 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. There are some variant perceptions on Silicon Motion Technology, with the most bullish analyst valuing it at US$65.00 and the most bearish at US$43.00 per share. These price targets show that analysts do have some differing views on the business, but the estimates do not vary enough to suggest to us that some are betting on wild success or utter failure.

Looking at the bigger picture now, one of the ways we can make sense of these forecasts is to see how they measure up against both past performance and industry growth estimates. The analysts are definitely expecting Silicon Motion Technology's growth to accelerate, with the forecast 26% growth ranking favourably alongside historical growth of 2.0% per annum over the past five years. By contrast, our data suggests that other companies (with analyst coverage) in a similar industry are forecast to grow their revenue at 9.8% per year. Factoring in the forecast acceleration in revenue, it's pretty clear that Silicon Motion Technology is expected to grow much faster than its industry.

The Bottom Line

The most important thing to take away from this upgrade is that analysts upgraded their earnings per share estimates for this year, expecting improving business conditions. They also upgraded their revenue estimates for this year, and sales are expected to grow faster than the wider market. There was also an increase in the price target, suggesting that there is more optimism baked into the forecasts than there was previously. Given that analysts appear to be expecting substantial improvement in the sales pipeline, now could be the right time to take another look at Silicon Motion Technology.

Better yet, our automated discounted cash flow calculation (DCF) suggests Silicon Motion Technology could be moderately undervalued. For more information, you can click through to our platform to learn more about our valuation approach.

Of course, seeing company management invest large sums of money in a stock can be just as useful as knowing whether analysts are upgrading their estimates. So you may also wish to search this free list of stocks 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.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.