It's been a good week for Tower Semiconductor Ltd. (NASDAQ:TSEM) shareholders, because the company has just released its latest third-quarter results, and the shares gained 3.2% to US$22.99. It looks like a credible result overall - although revenues of US$310m were what the analysts expected, Tower Semiconductor surprised by delivering a (statutory) profit of US$0.18 per share, an impressive 43% above what was forecast. This is an important time for investors, as they can track a company's performance in its report, look at what experts 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 the analysts latest (statutory) post-earnings forecasts for next year.
Taking into account the latest results, the current consensus from Tower Semiconductor's six analysts is for revenues of US$1.36b in 2021, which would reflect a meaningful 11% increase on its sales over the past 12 months. Statutory earnings per share are predicted to leap 78% to US$1.20. In the lead-up to this report, the analysts had been modelling revenues of US$1.34b and earnings per share (EPS) of US$1.13 in 2021. The analysts seems to have become more bullish on the business, judging by their new earnings per share estimates.
The analysts have been lifting their price targets on the back of the earnings upgrade, with the consensus price target rising 13% to US$27.54. 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. Currently, the most bullish analyst values Tower Semiconductor at US$30.00 per share, while the most bearish prices it at US$21.20. Analysts definitely have varying views on the business, but the spread of estimates is not wide enough in our view to suggest that extreme outcomes could await Tower Semiconductor shareholders.
Of course, another way to look at these forecasts is to place them into context against the industry itself. It's clear from the latest estimates that Tower Semiconductor's rate of growth is expected to accelerate meaningfully, with the forecast 11% revenue growth noticeably faster than its historical growth of 3.6%p.a. over the past five years. Compare this with other companies in the same industry, which are forecast to grow their revenue 9.4% next year. Factoring in the forecast acceleration in revenue, it's pretty clear that Tower Semiconductor is expected to grow at about the same rate as the wider industry.
The Bottom Line
The most important thing here is that the analysts upgraded their earnings per share estimates, suggesting that there has been a clear increase in optimism towards Tower Semiconductor following these results. They also reconfirmed their revenue estimates, with the company predicted to grow at about the same rate as the wider industry. There was also a nice increase in the price target, with the analysts clearly feeling that the intrinsic value of the business is improving.
Following on from that line of thought, we think that the long-term prospects of the business are much more relevant than next year's earnings. We have forecasts for Tower Semiconductor 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 1 warning sign with Tower Semiconductor , and understanding it 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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