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Dolby Laboratories, Inc. Just Beat Analyst Forecasts, And Analysts Have Been Updating Their Predictions

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Simply Wall St
·4 min read
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Dolby Laboratories, Inc. (NYSE:DLB) just released its latest first-quarter results and things are looking bullish. Dolby Laboratories delivered a significant beat to revenue and earnings per share (EPS) expectations, with sales hitting US$390m, some 13% above indicated. Statutory EPS were US$1.30, an impressive 63% ahead of forecasts. Earnings are an important time for investors, as they can track a company's performance, look at what the analysts are forecasting for next year, and see if there's been a change in sentiment towards the company. Readers will be glad to know we've aggregated the latest statutory forecasts to see whether the analysts have changed their mind on Dolby Laboratories after the latest results.

View our latest analysis for Dolby Laboratories

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Following last week's earnings report, Dolby Laboratories' five analysts are forecasting 2021 revenues to be US$1.26b, approximately in line with the last 12 months. Statutory earnings per share are expected to decline 20% to US$2.54 in the same period. In the lead-up to this report, the analysts had been modelling revenues of US$1.22b and earnings per share (EPS) of US$2.08 in 2021. There's been a pretty noticeable increase in sentiment, with the analysts upgrading revenues and making a very substantial lift in earnings per share in particular.

It will come as no surprise to learn that the analysts have increased their price target for Dolby Laboratories 6.9% to US$102on the back of these upgrades. The consensus price target is just an average of individual analyst targets, so - it could be handy to see how wide the range of underlying estimates is. There are some variant perceptions on Dolby Laboratories, with the most bullish analyst valuing it at US$110 and the most bearish at US$89.00 per share. With such a narrow range of valuations, the analysts apparently share similar views on what they think the business is worth.

Taking a look at the bigger picture now, one of the ways we can understand these forecasts is to see how they compare to both past performance and industry growth estimates. We would highlight that Dolby Laboratories' revenue growth is expected to slow, with forecast 0.1% increase next year well below the historical 4.5%p.a. growth over the last five years. By way of comparison, the other companies in this industry with analyst coverage are forecast to grow their revenue at 7.4% per year. Factoring in the forecast slowdown in growth, it seems obvious that Dolby Laboratories is also expected to grow slower than other industry participants.

The Bottom Line

The biggest takeaway for us is the consensus earnings per share upgrade, which suggests a clear improvement in sentiment around Dolby Laboratories' earnings potential next year. They also upgraded their revenue estimates for next year, even though sales are expected to grow slower than the wider industry. There was also a nice increase in the price target, with the analysts clearly feeling that the intrinsic value of the business is improving.

Following on from that line of thought, we think that the long-term prospects of the business are much more relevant than next year's earnings. At Simply Wall St, we have a full range of analyst estimates for Dolby Laboratories going out to 2023, and you can see them free on our platform here..

That said, it's still necessary to consider the ever-present spectre of investment risk. We've identified 1 warning sign with Dolby Laboratories , and understanding it should be part of your investment process.

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.