NeoPhotonics Corporation (NYSE:NPTN) shares fell 8.2% to US$6.61 in the week since its latest annual results. The results overall were pretty much dead in line with analyst forecasts; revenues were US$357m and statutory losses were US$0.36 per share. This is an important time for investors, as they can track a company's performance in its report, look at what top analysts are forecasting for next year, and see if there has been any change to expectations for the business. We thought readers would find it interesting to see analysts' latest (statutory) post-earnings forecasts for next year.
After the latest results, the ten analysts covering NeoPhotonics are now predicting revenues of US$382.1m in 2020. If met, this would reflect a reasonable 7.1% improvement in sales compared to the last 12 months. NeoPhotonics is also expected to turn profitable, with statutory earnings of US$0.05 per share. In the lead-up to this report, analysts had been modelling revenues of US$375.0m and earnings per share (EPS) of US$0.013 in 2020. There was no real change to the revenue estimates, but analysts do seem more bullish on earnings, given the sizeable expansion in earnings per share expectations following these results.
There's been no major changes to the consensus price target of US$9.19, suggesting that the improved earnings per share outlook is not enough to have a long-term positive impact on the stock's valuation. 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. The most optimistic NeoPhotonics analyst has a price target of US$11.00 per share, while the most pessimistic values it at US$7.00. 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.
It can be useful to take a broader overview by seeing how analyst forecasts compare, both to the NeoPhotonics's past performance and to peers in the same market. For example, we noticed that NeoPhotonics's rate of growth is expected to accelerate meaningfully, with revenues forecast to grow at 7.1%, well above its historical decline of 0.6% a year over the past five years. Compare this against analyst estimates for the wider market, which suggest that (in aggregate) market revenues are expected to grow 9.0% next year. So although NeoPhotonics's revenue growth is expected to improve, it is still expected to grow slower than the market.
The Bottom Line
The most important thing to take away from this is that analysts upgraded their earnings per share estimates, suggesting that there has been a clear increase in optimism towards NeoPhotonics following these results. On the plus side, there were no major changes to revenue estimates; although analyst forecasts imply revenues will perform worse than the wider market. There was no real change to the consensus price target, suggesting that the intrinsic value of the business has not undergone any major changes with the latest estimates.
With that in mind, we wouldn't be too quick to come to a conclusion on NeoPhotonics. Long-term earnings power is much more important than next year's profits. We have estimates - from multiple NeoPhotonics analysts - going out to 2024, and you can see them free on our platform here.
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