Freshworks Inc. (NASDAQ:FRSH) Just Reported And Analysts Have Been Lifting Their Price Targets
Shareholders might have noticed that Freshworks Inc. (NASDAQ:FRSH) filed its annual result this time last week. The early response was not positive, with shares down 2.9% to US$15.79 in the past week. Revenues came in at US$498m, in line with forecasts and the company reported a statutory loss of US$0.82 per share, roughly in line with expectations. Earnings are an important time for investors, as they can track a company's performance, look at what the analysts are forecasting for next year, and see if there's been a change in sentiment towards the company. So we gathered the latest post-earnings forecasts to see what estimates suggest is in store for next year.
Check out our latest analysis for Freshworks
Taking into account the latest results, the most recent consensus for Freshworks from 15 analysts is for revenues of US$582.1m in 2023 which, if met, would be a meaningful 17% increase on its sales over the past 12 months. Losses are supposed to decline, shrinking 14% from last year to US$0.69. Yet prior to the latest earnings, the analysts had been forecasting revenues of US$595.5m and losses of US$0.77 per share in 2023. So there seems to have been a moderate uplift in analyst sentiment with the latest consensus release, given the upgrade to loss per share forecasts for this year.
There was a decent 6.6% increase in the price target to US$18.50, with the analysts clearly signalling that the expected reduction in losses is a positive, despite a weaker revenue outlook. That's not the only conclusion we can draw from this data however, as some investors also like to consider the spread in estimates when evaluating analyst price targets. Currently, the most bullish analyst values Freshworks at US$25.00 per share, while the most bearish prices it at US$14.00. 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 Freshworks shareholders.
Taking a look at the bigger picture now, one of the ways we can understand these forecasts is to see how they compare to both past performance and industry growth estimates. We would highlight that Freshworks' revenue growth is expected to slow, with the forecast 17% annualised growth rate until the end of 2023 being well below the historical 32% p.a. growth over the last three years. By way of comparison, the other companies in this industry with analyst coverage are forecast to grow their revenue at 12% annually. Even after the forecast slowdown in growth, it seems obvious that Freshworks is also expected to grow faster than the wider industry.
The Bottom Line
The most obvious conclusion is that the analysts made no changes to their forecasts for a loss next year. They also downgraded their revenue estimates, although industry data suggests that Freshworks' revenues are expected to grow faster than the wider industry. Still, earnings are more important to the intrinsic value of the business. 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.
With that in mind, we wouldn't be too quick to come to a conclusion on Freshworks. Long-term earnings power is much more important than next year's profits. We have forecasts for Freshworks going out to 2025, and you can see them free on our platform here.
You still need to take note of risks, for example - Freshworks has 2 warning signs we think you should be aware of.
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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. 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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