The investors in Kornit Digital Ltd.‘s (NASDAQ:KRNT) will be rubbing their hands together with glee today, after the share price leapt 63% to US$47.74 in the week following its first-quarter results. Revenues were in line with expectations, at US$26m, while statutory losses ballooned to US$0.25 per share. 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. So we gathered the latest post-earnings forecasts to see what estimates suggest is in store for next year.
After the latest results, the consensus from Kornit Digital’s five analysts is for revenues of US$163.4m in 2020, which would reflect a perceptible 2.4% decline in sales compared to the last year of performance. Earnings are expected to tip over into lossmaking territory, with the analysts forecasting statutory losses of -US$0.18 per share in 2020. Before this earnings announcement, the analysts had been modelling revenues of US$129.8m and losses of US$0.27 per share in 2020. We can see there’s definitely been a change in sentiment in this update, with the analysts administering a sizeable upgrade to this year’s revenue estimates, while at the same time reducing their loss estimates.
The consensus price target rose 25% to US$40.33, with the analysts encouraged by the higher revenue and lower forecast losses for next year. 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. There are some variant perceptions on Kornit Digital, with the most bullish analyst valuing it at US$47.00 and the most bearish at US$34.00 per share. These price targets show that analysts do have some differing views on the business, but the estimates do not vary enough to suggest to us that some are betting on wild success or utter failure.
One way to get more context on these forecasts is to look at how they compare to both past performance, and how other companies in the same industry are performing. We would highlight that sales are expected to reverse, with the forecast 2.4% revenue decline a notable change from historical growth of 17% over the last five years. By contrast, our data suggests that other companies (with analyst coverage) in the same industry are forecast to see their revenue grow 5.7% annually for the foreseeable future. So although its revenues are forecast to shrink, this cloud does not come with a silver lining – Kornit Digital is expected to lag 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 upgraded their revenue estimates for next year, even though sales are expected to grow slower than 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 Kornit Digital going out to 2021, and you can see them free on our platform here.
We don’t want to rain on the parade too much, but we did also find 4 warning signs for Kornit Digital that you need to be mindful of.
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