One Sonic Foundry, Inc. (NASDAQ:SOFO) Analyst Just Cut Their EPS Forecasts
Market forces rained on the parade of Sonic Foundry, Inc. (NASDAQ:SOFO) shareholders today, when the covering analyst downgraded their forecasts for next year. Both revenue and earnings per share (EPS) forecasts went under the knife, suggesting the analyst has soured majorly on the business.
After the downgrade, the lone analyst covering Sonic Foundry is now predicting revenues of US$30m in 2024. If met, this would reflect a major 28% improvement in sales compared to the last 12 months. Losses are expected to be contained, narrowing 19% per share from last year to US$1.23 per share. However, before this estimates update, the consensus had been expecting revenues of US$39m and US$0.85 per share in losses. Ergo, there's been a clear change in sentiment, with the analyst administering a notable cut to next year's revenue estimates, while at the same time increasing their loss per share forecasts.
See our latest analysis for Sonic Foundry
The consensus price target fell 33% to US$2.00, with the analyst clearly concerned about the company following the weaker revenue and earnings outlook.
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. One thing stands out from these estimates, which is that Sonic Foundry is forecast to grow faster in the future than it has in the past, with revenues expected to display 22% annualised growth until the end of 2024. If achieved, this would be a much better result than the 5.7% annual decline over the past five years. Compare this against analyst estimates for the broader industry, which suggest that (in aggregate) industry revenues are expected to grow 12% annually. Not only are Sonic Foundry's revenues expected to improve, it seems that the analyst is also expecting it to grow faster than the wider industry.
The Bottom Line
The most important thing to take away is that the analyst increased their loss per share estimates for next year. While the analyst did downgrade their revenue estimates, these forecasts still imply revenues will perform better than the wider market. With a serious cut to next year's expectations and a falling price target, we wouldn't be surprised if investors were becoming wary of Sonic Foundry.
So things certainly aren't looking great, and you should also know that we've spotted some potential warning signs with Sonic Foundry, including dilutive stock issuance over the past year. Learn more, and discover the 3 other flags we've identified, for free on our platform here.
Of course, seeing company management invest large sums of money in a stock can be just as useful as knowing whether analysts are downgrading their estimates. So you may also wish to search this free list of stocks that insiders are buying.
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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.
