CooTek (Cayman) Inc. (NYSE:CTK) shares fell 3.6% to US$6.20 in the week since its latest full-year results. The results don’t look great, especially considering that statutory losses grew 14% toUS$0.58 per share. Revenues of US$177,884,000 did beat expectations by 9.7%, but it looks like a bit of a cold comfort. Following the result, 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 collected the latest post-earnings statutory consensus estimates to see what could be in store for next year.
Taking into account the latest results, the latest consensus from CooTek (Cayman)’s only analyst is for revenues of US$482.0m in 2020, which would reflect a substantial 171% improvement in sales compared to the last 12 months. Earnings are expected to improve, with CooTek (Cayman) forecast to report a statutory profit of US$0.46 per share. Before this earnings report, analysts had been forecasting revenues of US$257.8m and earnings per share (EPS) of US$0.52 in 2020. Although sales sentiment looks to be improving, analysts have made a real cut to per-share earnings estimates, showing a sharp increase in pessimism after earnings.
Curiously, the consensus price target rose 21% to US$7.15. We can only conclude that the forecast revenue growth is expected to offset the impact of the expected fall in earnings.
It can also be useful to step back and take a broader view of how analyst forecasts compare to CooTek (Cayman)’s performance in recent years. It’s clear from the latest estimates that CooTek (Cayman)’s rate of growth is expected to accelerate meaningfully, with forecast 171% revenue growth noticeably faster than its historical growth of 59%p.a. over the past three years. Compare this with other companies in the same market, which are forecast to grow their revenue 12% next year. Factoring in the forecast acceleration in revenue, it’s pretty clear that CooTek (Cayman) is expected to grow much faster than its market.
The Bottom Line
The biggest concern with the new estimates is that analysts have reduced their earnings per share estimates, suggesting business headwinds could lay ahead for CooTek (Cayman). Pleasantly, analysts also upgraded their revenue estimates, and their forecasts suggest the business is expected to grow faster than the wider market. Analysts also upgraded their price target, suggesting that analysts believe the intrinsic value of the business is likely to improve over time.
With that in mind, we wouldn’t be too quick to come to a conclusion on CooTek (Cayman). Long-term earnings power is much more important than next year’s profits. We have analyst estimates for CooTek (Cayman) going out as far as 2021, 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.
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