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AXT, Inc. (NASDAQ:AXTI) shareholders will have a reason to smile today, with the analysts making substantial upgrades to this year's statutory forecasts. The analysts greatly increased their revenue estimates, suggesting a stark improvement in business fundamentals. AXT has also found favour with investors, with the stock up a noteworthy 23% to US$15.37 over the past week. Could this upgrade be enough to drive the stock even higher?
After the upgrade, the four analysts covering AXT are now predicting revenues of US$121m in 2021. If met, this would reflect a sizeable 27% improvement in sales compared to the last 12 months. Statutory earnings per share are presumed to surge 186% to US$0.23. Previously, the analysts had been modelling revenues of US$108m and earnings per share (EPS) of US$0.17 in 2021. There has definitely been an improvement in perception recently, with the analysts substantially increasing both their earnings and revenue estimates.
It will come as no surprise to learn that the analysts have increased their price target for AXT 40% to US$16.00 on the back of these upgrades. There's another way to think about price targets though, and that's to look at the range of price targets put forward by analysts, because a wide range of estimates could suggest a diverse view on possible outcomes for the business. There are some variant perceptions on AXT, with the most bullish analyst valuing it at US$15.00 and the most bearish at US$10.00 per share. This shows there is still some diversity in estimates, but analysts don't appear to be totally split on the stock as though it might be a success or failure situation.
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. It's clear from the latest estimates that AXT's rate of growth is expected to accelerate meaningfully, with the forecast 27% revenue growth noticeably faster than its historical growth of 2.6% p.a. over the past five years. Compare this with other companies in the same industry, which are forecast to grow their revenue 9.0% next year. Factoring in the forecast acceleration in revenue, it's pretty clear that AXT is expected to grow much faster than its industry.
The Bottom Line
The biggest takeaway for us from these new estimates is that analysts upgraded their earnings per share estimates, with improved earnings power expected for this year. Fortunately, analysts also upgraded their revenue estimates, and our data indicates sales are expected to perform better than the wider market. With a serious upgrade to expectations and a rising price target, it might be time to take another look at AXT.
With that said, the long-term trajectory of the company's earnings is a lot more important than next year. We have estimates - from multiple AXT analysts - going out to 2022, and you can see them free on our platform here.
Another way to search for interesting companies that could be reaching an inflection point is to track whether management are buying or selling, with our free list of growing companies that insiders are buying.
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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