It's been a good week for AutoWeb, Inc. (NASDAQ:AUTO) shareholders, because the company has just released its latest quarterly results, and the shares gained 9.7% to US$0.95. Revenues were in line with expectations, at US$24m, while statutory losses ballooned to US$0.31 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. So we collected the latest post-earnings statutory consensus estimates to see what could be in store for next year.
Following the recent earnings report, the consensus from four analysts covering AutoWeb is for revenues of US$93.5m in 2020, implying a considerable 13% decline in sales compared to the last 12 months. Losses are forecast to narrow 6.1% to US$1.00 per share. Yet prior to the latest earnings, the analysts had been forecasting revenues of US$98.6m and losses of US$0.93 per share in 2020. Overall it looks as though the analysts are negative in this update. Although sales forecasts held steady, the consensus also made a to its losses per share forecasts.
The average price target fell 52% to US$1.88, implicitly signalling that lower earnings per share are a leading indicator for AutoWeb's valuation. 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 AutoWeb, with the most bullish analyst valuing it at US$2.50 and the most bearish at US$1.15 per share. This is a fairly broad spread of estimates, suggesting that analysts are forecasting a wide range of possible outcomes for the business.
One way to get more context on these forecasts is to look at how they compare to both past performance, and how other companies in the same industry are performing. One more thing stood out to us about these estimates, and it's the idea that AutoWeb'sdecline is expected to accelerate, with revenues forecast to fall 13% next year, topping off a historical decline of 2.0% a year over the past five years. Compare this against analyst estimates for companies in the wider industry, which suggest that revenues (in aggregate) are expected to grow 16% next year. So it's pretty clear that, while it does have declining revenues, the analysts also expect AutoWeb to suffer worse than the wider industry.
The Bottom Line
The most important thing to note is the forecast of increased losses next year, suggesting all may not be well at AutoWeb. On the negative side, they also downgraded their revenue estimates, and forecasts imply revenues will perform worse than the wider industry. Furthermore, the analysts also cut their price targets, suggesting that the latest news has led to greater pessimism about the intrinsic value of the business.
Keeping that in mind, we still think that the longer term trajectory of the business is much more important for investors to consider. We have estimates - from multiple AutoWeb analysts - going out to 2021, and you can see them free on our platform here.
You still need to take note of risks, for example - AutoWeb has 4 warning signs (and 1 which is potentially serious) we think you should know about.
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