Ooma, Inc. (NYSE:OOMA) defied analyst predictions to release its quarterly results, which were ahead of market expectations. Results overall were solid, with revenues arriving 3.1% better than analyst forecasts at US$40m. Higher revenues also resulted in substantially lower losses which, at US$0.32 per share, were 3.1% smaller than analysts expected. Analysts typically update their forecasts at each earnings report, and we can judge from their estimates whether their view of the company has changed or if there are any new concerns to be aware of. So we collected the latest post-earnings consensus estimates to see what could be in store for next year.
Taking into account the latest results, the current consensus from Ooma's six analysts is for revenues of US$166.7m in 2021, which would reflect a meaningful 14% increase on its sales over the past 12 months. Losses are forecast to balloon 20% to US$0.77 per share. Yet prior to the latest earnings, analysts had been forecasting revenues of US$163.9m and losses of US$0.89 per share in 2021. Although the revenue estimates have not really changed, we can see there's been a substantial gain in earnings per share expectations, suggesting that analysts have become more bullish after the latest result.
There's been no major changes to the consensus price target of US$17.30, suggesting that reduced loss estimates are not enough to have a long-term positive impact on 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. There are some variant perceptions on Ooma, with the most bullish analyst valuing it at US$21.50 and the most bearish at US$11.00 per share. Note the wide gap in analyst price targets? This implies to us that there is a fairly broad range of possible scenarios for the underlying business.
Zooming out to look at the bigger picture now, one of the ways we can make sense of these forecasts is to see how they measure up both against past performance, and against industry growth estimates. We can infer from the latest estimates that analysts are expecting a continuation of Ooma's historical trends, as next year's forecast 14% revenue growth is roughly in line with 14% annual revenue growth over the past five years. Compare this with the wider market, which analyst estimates (in aggregate) suggest will see revenues grow 1.1% next year. So it's pretty clear that Ooma is forecast to grow substantially faster than its market.
The Bottom Line
The most important thing to take away is that analysts increased their loss per share estimates for next year. Fortunately, analysts also reconfirmed their revenue estimates, suggesting sales are tracking in line with expectations - and our data does suggest that Ooma's revenues are expected to grow faster 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 said, the long-term trajectory of the company's earnings is a lot more important than next year. We have estimates - from multiple Ooma analysts - going out to 2022, and you can see them free on our platform here.
Another thing to consider is whether management and directors have been buying or selling stock recently. We provide an overview of all open market stock trades for the last twelve months on our platform, here.
If you spot an error that warrants correction, please contact the editor at email@example.com. 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. Simply Wall St has no position in the stocks mentioned.
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