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Earnings Update: Here's Why Analysts Just Lifted Their EMCORE Corporation Price Target To US$5.10

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Simply Wall St
·4 min read
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Last week, you might have seen that EMCORE Corporation (NASDAQ:EMKR) released its first-quarter result to the market. The early response was not positive, with shares down 7.1% to US$3.13 in the past week. Revenues were in line with expectations, at US$25m, while statutory losses ballooned to US$0.05 per share. Earnings are an important time for investors, as they can track a company's performance, look at what top analysts are forecasting for next year, and see if there's been a change in sentiment towards the company. We've gathered the most recent statutory forecasts to see whether analysts have changed their earnings models, following these results.

View our latest analysis for EMCORE

NasdaqGM:EMKR Past and Future Earnings, February 10th 2020
NasdaqGM:EMKR Past and Future Earnings, February 10th 2020

Taking into account the latest results, the latest consensus from EMCORE's three analysts is for revenues of US$104.9m in 2020, which would reflect a solid 18% improvement in sales compared to the last 12 months. Per-share statutory losses are expected to explode, reaching US$0.32 per share. Before this latest report, the consensus had been expecting revenues of US$113.9m and US$0.70 per share in losses. While revenue forecasts have been revised downwards, analysts look to have become more optimistic on the company's earnings power, given the massive increase in to earnings per share forecasts.

The consensus price target rose 7.7% to US$5.10, with analysts increasingly optimistic about shrinking losses, despite the expected decline in sales. Fixating on a single price target can be unwise though, since the consensus target is effectively the average of analyst price targets. As a result, some investors like to look at the range of estimates to see if there are any diverging opinions on the company's valuation. Currently, the most bullish analyst values EMCORE at US$5.80 per share, while the most bearish prices it at US$4.50. The narrow spread of estimates could suggest that the business' future is relatively easy to value, or that analysts have a clear view on its prospects.

Another way to assess these estimates is by comparing them to past performance, and seeing whether analysts are more or less bullish relative to other companies in the market. It's clear from the latest estimates that EMCORE's rate of growth is expected to accelerate meaningfully, with forecast 18% revenue growth noticeably faster than its historical growth of 4.1%p.a. 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 3.4% per year. It seems obvious that, while the growth outlook is brighter than the recent past, analysts also expect EMCORE to grow faster than the wider market.

The Bottom Line

The most important thing to take away is that analysts increased their loss per share estimates for next year. Unfortunately analysts also downgraded their revenue estimates, although industry data suggests that EMCORE's revenues are expected to grow faster than the wider market. Still, earnings are more important to the long-term value of the business. Analysts also upgraded their price target, suggesting that analysts believe the intrinsic value of the business is likely to improve over time.

Still, 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 EMCORE going out to 2021, and you can see them free on our platform here..

We also provide an overview of the EMCORE Board and CEO remuneration and length of tenure at the company, and whether insiders have been buying the stock, here.

If you spot an error that warrants correction, please contact the editor at editorial-team@simplywallst.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.