It's been a sad week for QuickLogic Corporation (NASDAQ:QUIK), who've watched their investment drop 13% to US$4.31 in the week since the company reported its first-quarter result. Despite revenues of US$2.2m falling 3.4% short of expectations, statutory losses of US$0.38 per share were well contained, and in line with analyst models. The 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. We thought readers would find it interesting to see the analysts latest (statutory) post-earnings forecasts for next year.
Taking into account the latest results, the consensus forecast from QuickLogic's three analysts is for revenues of US$13.0m in 2020, which would reflect a huge 40% improvement in sales compared to the last 12 months. Losses are predicted to fall substantially, shrinking 54% to US$0.87. Yet prior to the latest earnings, the analysts had been forecasting revenues of US$15.1m and losses of US$0.88 per share in 2020. So there's definitely been a change in sentiment in this update, with the analysts administering a substantial haircut to next year's revenue estimates, while at the same time holding losses per share steady.
The analysts have cut their price target 5.8% to US$12.25 per share, signalling that the declining revenue and ongoing losses are contributing to the lower 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. Currently, the most bullish analyst values QuickLogic at US$28.00 per share, while the most bearish prices it at US$5.00. As you can see the range of estimates is wide, with the lowest valuation coming in at less than half the most bullish estimate, suggesting there are some strongly diverging views on how analysts think this business will perform. As a result it might not be a great idea to make decisions based on the consensus price target, which is after all just an average of this wide range of estimates.
Of course, another way to look at these forecasts is to place them into context against the industry itself. For example, we noticed that QuickLogic's rate of growth is expected to accelerate meaningfully, with revenues forecast to grow 40%, well above its historical decline of 14% a year over the past five years. By contrast, our data suggests that other companies (with analyst coverage) in the industry are forecast to see their revenue grow 9.0% per year. Not only are QuickLogic's revenues expected to improve, it seems that the analysts are also expecting it 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 QuickLogic's revenues are expected to grow faster than the wider industry. The consensus price target fell measurably, with the analysts seemingly not reassured by the latest results, leading to a lower estimate of QuickLogic's future valuation.
Keeping that in mind, we still think that the longer term trajectory of the business is much more important for investors to consider. At Simply Wall St, we have a full range of analyst estimates for QuickLogic going out to 2021, and you can see them free on our platform here..
That said, it's still necessary to consider the ever-present spectre of investment risk. We've identified 4 warning signs with QuickLogic , and understanding them should be part of your investment process.
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