- Oops!Something went wrong.Please try again later.
It's been a pretty great week for SecureWorks Corp. (NASDAQ:SCWX) shareholders, with its shares surging 11% to US$11.84 in the week since its latest yearly results. The results look positive overall; while revenues of US$553m were in line with analyst predictions, statutory losses were 9.1% smaller than expected, with SecureWorks losing US$0.39 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 gathered the latest post-earnings forecasts to see what estimates suggest is in store for next year.
Following last week's earnings report, SecureWorks's nine analysts are forecasting 2021 revenues to be US$555.0m, approximately in line with the last 12 months. Per-share losses are expected to explode, reaching US$0.55 per share. Before this latest report, the consensus had been expecting revenues of US$580.3m and US$0.42 per share in losses. While this year's revenue estimates dropped there was also a large cut to loss per share expectations, suggesting the consensus has a bit of a mixed view on the stock.
The consensus price target fell 5.8% to US$12.72, with the analysts clearly concerned about the company following the weaker revenue and earnings outlook. 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. The most optimistic SecureWorks analyst has a price target of US$17.00 per share, while the most pessimistic values it at US$10.00. Analysts definitely have varying views on the business, but the spread of estimates is not wide enough in our view to suggest that extreme outcomes could await SecureWorks shareholders.
These estimates are interesting, but it can be useful to paint some more broad strokes when seeing how forecasts compare, both to the SecureWorks's past performance and to peers in the same industry. We would highlight that SecureWorks's revenue growth is expected to slow, with forecast 0.4% increase next year well below the historical 13%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 12% per 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 SecureWorks.
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 negative side, they also downgraded their revenue estimates, and forecasts imply revenues will perform worse than the wider industry. The consensus price target fell measurably, with the analysts seemingly not reassured by the latest results, leading to a lower estimate of SecureWorks's future valuation.
With that said, the long-term trajectory of the company's earnings is a lot more important than next year. We have forecasts for SecureWorks going out to 2023, and you can see them free on our platform here.
We don't want to rain on the parade too much, but we did also find 3 warning signs for SecureWorks (1 is a bit concerning!) that you need to be mindful of.
If you spot an error that warrants correction, please contact the editor at firstname.lastname@example.org. 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.