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Earnings Update: NEXTDC Limited (ASX:NXT) Just Reported Its Half-Year Results And Analysts Are Updating Their Forecasts

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NEXTDC Limited (ASX:NXT) shareholders are probably feeling a little disappointed, since its shares fell 4.6% to AU$11.20 in the week after its latest interim results. Revenues of AU$124m beat expectations by a respectable 5.1%, although statutory losses per share increased. NEXTDC lost AU$0.038, which was 381% more than what the analysts had included in their models. This is an important time for investors, as they can track a company's performance in its report, look at what experts are forecasting for next year, and see if there has been any change to expectations for the business. So we collected the latest post-earnings statutory consensus estimates to see what could be in store for next year.

View our latest analysis for NEXTDC

earnings-and-revenue-growth
earnings-and-revenue-growth

Taking into account the latest results, the most recent consensus for NEXTDC from twelve analysts is for revenues of AU$250.5m in 2021 which, if met, would be a meaningful 10% increase on its sales over the past 12 months. Losses are predicted to fall substantially, shrinking 60% to AU$0.056. Yet prior to the latest earnings, the analysts had been forecasting revenues of AU$248.7m and losses of AU$0.0075 per share in 2021. While this year's revenue estimates held steady, there was also a massive increase in loss per share expectations, suggesting the consensus has a bit of a mixed view on the stock.

As a result, there was no major change to the consensus price target of AU$14.04, with the analysts implicitly confirming that the business looks to be performing in line with expectations, despite higher forecast losses. It could also be instructive to look at the range of analyst estimates, to evaluate how different the outlier opinions are from the mean. The most optimistic NEXTDC analyst has a price target of AU$16.42 per share, while the most pessimistic values it at AU$10.85. As you can see, analysts are not all in agreement on the stock's future, but the range of estimates is still reasonably narrow, which could suggest that the outcome is not totally unpredictable.

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. We would highlight that NEXTDC's revenue growth is expected to slow, with forecast 10% increase next year well below the historical 19%p.a. growth over the last five years. Compare this against other companies (with analyst forecasts) in the industry, which are in aggregate expected to see revenue growth of 25% next year. So it's pretty clear that, while revenue growth is expected to slow down, the wider industry is also expected to grow faster than NEXTDC.

The Bottom Line

The most important thing to take away is that the analysts increased their loss per share estimates for next year. On the plus side, there were no major changes to revenue estimates; although forecasts imply revenues will perform worse than the wider industry. The consensus price target held steady at AU$14.04, with the latest estimates not enough to have an impact on their price targets.

With that in mind, we wouldn't be too quick to come to a conclusion on NEXTDC. Long-term earnings power is much more important than next year's profits. We have forecasts for NEXTDC going out to 2025, and you can see them free on our platform here.

However, before you get too enthused, we've discovered 1 warning sign for NEXTDC that you should be aware of.

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.