Here's What Analysts Are Forecasting For Locaweb Serviços de Internet S.A. (BVMF:LWSA3) After Its First-Quarter Results

Last week, you might have seen that Locaweb Serviços de Internet S.A. (BVMF:LWSA3) released its first-quarter result to the market. The early response was not positive, with shares down 8.0% to R$22.82 in the past week. It was a workmanlike result, with revenues of R$161m coming in 4.1% ahead of expectations, and statutory earnings per share of R$0.04, in line with analyst appraisals. 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. So we gathered the latest post-earnings forecasts to see what estimates suggest is in store for next year.

View our latest analysis for Locaweb Serviços de Internet

After the latest results, the five analysts covering Locaweb Serviços de Internet are now predicting revenues of R$604.0m in 2021. If met, this would reflect a major 24% improvement in sales compared to the last 12 months. Per-share earnings are expected to leap 1,811% to R$0.77. Before this earnings report, the analysts had been forecasting revenues of R$715.5m and earnings per share (EPS) of R$0.19 in 2021. So there's been quite a change-up of views after the latest results, with the analysts making a serious cut to their revenue forecasts while also granting a great increase in to the earnings per share numbers.

The consensus has made no major changes to the price target of R$31.54, suggesting the forecast improvement in earnings is expected to offset the decline in revenues 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. Currently, the most bullish analyst values Locaweb Serviços de Internet at R$43.00 per share, while the most bearish prices it at R$22.50. This is a fairly broad spread of estimates, suggesting that analysts are forecasting a wide range of possible outcomes for the business.

Taking a look at the bigger picture now, one of the ways we can understand these forecasts is to see how they compare to both past performance and industry growth estimates. The analysts are definitely expecting Locaweb Serviços de Internet's growth to accelerate, with the forecast 33% annualised growth to the end of 2021 ranking favourably alongside historical growth of 27% per annum over the past year. By contrast, our data suggests that other companies (with analyst coverage) in a similar industry are forecast to grow their revenue at 13% per year. It seems obvious that, while the growth outlook is brighter than the recent past, the analysts also expect Locaweb Serviços de Internet to grow faster than 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 Locaweb Serviços de Internet following these results. Regrettably, they also downgraded their revenue estimates, but the latest forecasts still imply the business will grow faster than the wider industry. Yet - earnings are more important to the intrinsic value of the business. The consensus price target held steady at R$31.54, with the latest estimates not enough to have an impact on their price targets.

With that said, the long-term trajectory of the company's earnings is a lot more important than next year. We have forecasts for Locaweb Serviços de Internet going out to 2025, and you can see them free on our platform here.

And what about risks? Every company has them, and we've spotted 2 warning signs for Locaweb Serviços de Internet you should know about.

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