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Shareholders of Extreme Networks, Inc. (NASDAQ:EXTR) will be pleased this week, given that the stock price is up 17% to US$10.23 following its latest second-quarter results. Revenues came in at US$242m, in line with forecasts and the company reported a statutory loss of US$0.02 per share, roughly in line with expectations. 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 gathered the latest post-earnings forecasts to see what estimates suggest is in store for next year.
Taking into account the latest results, the most recent consensus for Extreme Networks from seven analysts is for revenues of US$975.9m in 2021 which, if met, would be a meaningful 8.1% increase on its sales over the past 12 months. The loss per share is expected to greatly reduce in the near future, narrowing 81% to US$0.12. Before this latest report, the consensus had been expecting revenues of US$973.7m and US$0.27 per share in losses. Although the revenue estimates have not really changed Extreme Networks'future looks a little different to the past, with a considerable decrease in the loss per share forecasts in particular.
The average price target rose 12% to US$10.25, with the analysts signalling that the forecast reduction in losses would be a positive for the stock's valuation. 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 Extreme Networks analyst has a price target of US$14.00 per share, while the most pessimistic values it at US$7.00. This is a fairly broad spread of estimates, suggesting that analysts are forecasting a wide range of possible outcomes for the business.
Of course, another way to look at these forecasts is to place them into context against the industry itself. We would highlight that Extreme Networks' revenue growth is expected to slow, with forecast 8.1% increase next year well below the historical 14%p.a. growth over the last five years. Juxtapose this against the other companies in the industry with analyst coverage, which are forecast to grow their revenues (in aggregate) 4.4% next year. So it's pretty clear that, while Extreme Networks' revenue growth is expected to slow, it's still expected to grow faster than the industry itself.
The Bottom Line
The most obvious conclusion is that the analysts made no changes to their forecasts for a loss next year. Happily, there were no major changes to revenue forecasts, with the business still expected to grow faster than the wider industry. We note an upgrade to the price target, suggesting that the analysts believes the intrinsic value of the business is likely to improve over time.
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 forecasts for Extreme Networks going out to 2023, and you can see them free on our platform here.
And what about risks? Every company has them, and we've spotted 3 warning signs for Extreme Networks (of which 1 is concerning!) you should know about.
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.
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