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Smith Micro Software, Inc. (NASDAQ:SMSI) Just Released Its Second-Quarter Earnings: Here's What Analysts Think

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There's been a notable change in appetite for Smith Micro Software, Inc. (NASDAQ:SMSI) shares in the week since its second-quarter report, with the stock down 11% to US$5.02. Revenues of US$16m beat expectations by a respectable 2.8%, although statutory losses per share increased. Smith Micro Software lost US$0.10, which was 74% more than what the analysts had included in their models. Following the result, the analysts have updated their earnings model, and it would be good to know whether they think there's been a strong change in the company's prospects, or if it's business as usual. We thought readers would find it interesting to see the analysts latest (statutory) post-earnings forecasts for next year.

See our latest analysis for Smith Micro Software


Taking into account the latest results, the consensus forecast from Smith Micro Software's four analysts is for revenues of US$61.7m in 2021, which would reflect a meaningful 18% improvement in sales compared to the last 12 months. Per-share losses are expected to explode, reaching US$0.22 per share. Before this earnings announcement, the analysts had been modelling revenues of US$63.1m and losses of US$0.17 per share in 2021. So it's pretty clear the analysts have mixed opinions on Smith Micro Software after this update; revenues were downgraded and per-share losses expected to increase.

The average price target was broadly unchanged at US$9.06, perhaps implicitly signalling that the weaker earnings outlook is not expected to have a long-term impact on the valuation. That's not the only conclusion we can draw from this data however, as some investors also like to consider the spread in estimates when evaluating analyst price targets. There are some variant perceptions on Smith Micro Software, with the most bullish analyst valuing it at US$9.75 and the most bearish at US$8.00 per share. Even so, with a relatively close grouping of estimates, it looks like the analysts are quite confident in their valuations, suggesting Smith Micro Software is an easy business to forecast or the the analysts are all using similar assumptions.

These estimates are interesting, but it can be useful to paint some more broad strokes when seeing how forecasts compare, both to the Smith Micro Software's past performance and to peers in the same industry. It's clear from the latest estimates that Smith Micro Software's rate of growth is expected to accelerate meaningfully, with the forecast 39% annualised revenue growth to the end of 2021 noticeably faster than its historical growth of 17% p.a. over the past five years. Compare this with other companies in the same industry, which are forecast to grow their revenue 14% annually. Factoring in the forecast acceleration in revenue, it's pretty clear that Smith Micro Software is expected to grow much faster than its industry.

The Bottom Line

The most important thing to note is the forecast of increased losses next year, suggesting all may not be well at Smith Micro Software. They also downgraded their revenue estimates, although industry data suggests that Smith Micro Software's revenues are expected to grow faster than the wider industry. 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 Smith Micro Software. Long-term earnings power is much more important than next year's profits. We have forecasts for Smith Micro Software going out to 2023, 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 2 warning signs with Smith Micro Software , and understanding them should be part of your investment process.

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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