The analysts covering Kaleyra, Inc. (NYSEMKT:KLR) delivered a dose of negativity to shareholders today, by making a substantial revision to their statutory forecasts for this year. Revenue and earnings per share (EPS) forecasts were both revised downwards, with analysts seeing grey clouds on the horizon.
Following the downgrade, the current consensus from Kaleyra's three analysts is for revenues of US$144m in 2020 which - if met - would reflect an okay 5.9% increase on its sales over the past 12 months. The loss per share is anticipated to greatly reduce in the near future, narrowing 53% to US$0.43. Previously, the analysts had been modelling revenues of US$165m and earnings per share (EPS) of US$0.20 in 2020. So we can see that the consensus has become notably more bearish on Kaleyra's outlook with these numbers, making a substantial drop in this year's revenue estimates. Furthermore, they expect the business to be loss-making this year, compared to their previous forecasts of a profit.
There was no major change to the consensus price target of US$12.83, signalling that the business is performing roughly in line with expectations, despite lower earnings per share forecasts. 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 Kaleyra, with the most bullish analyst valuing it at US$17.00 and the most bearish at US$9.00 per share. This is a fairly broad spread of estimates, suggesting that the analysts are forecasting a wide range of possible outcomes for the business.
Another way we can view these estimates is in the context of the bigger picture, such as how the forecasts stack up against past performance, and whether forecasts are more or less bullish relative to other companies in the industry. It's pretty clear that there is an expectation that Kaleyra's revenue growth will slow down substantially, with revenues next year expected to grow 5.9%, compared to a historical growth rate of 46% over the past year. Compare this against other companies (with analyst forecasts) in the industry, which are in aggregate expected to see revenue growth of 12% next year. Factoring in the forecast slowdown in growth, it seems obvious that Kaleyra is also expected to grow slower than other industry participants.
The Bottom Line
The most important thing to take away is that analysts are expecting Kaleyra to become unprofitable this year. Regrettably, they also downgraded their revenue estimates, and the latest forecasts imply the business will grow sales slower than the wider market. We're also surprised to see that the price target went unchanged. Still, deteriorating business conditions (assuming accurate forecasts!) can be a leading indicator for the stock price, so we wouldn't blame investors for being more cautious on Kaleyra after the downgrade.
With that said, the long-term trajectory of the company's earnings is a lot more important than next year. We have estimates - from multiple Kaleyra analysts - going out to 2022, 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.
We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Thank you for reading.