Need To Know: The Consensus Just Cut Its Desktop S.A. (BVMF:DESK3) Estimates For 2022

Market forces rained on the parade of Desktop S.A. (BVMF:DESK3) shareholders today, when the analysts downgraded their forecasts for this year. There was a fairly draconian cut to their revenue estimates, perhaps an implicit admission that previous forecasts were much too optimistic.

Following the downgrade, the latest consensus from Desktop's three analysts is for revenues of R$725m in 2022, which would reflect a sizeable 62% improvement in sales compared to the last 12 months. Statutory earnings per share are presumed to shoot up 841% to R$0.96. Previously, the analysts had been modelling revenues of R$812m and earnings per share (EPS) of R$1.46 in 2022. It looks like analyst sentiment has declined substantially, with a substantial drop in revenue estimates and a pretty serious decline to earnings per share numbers as well.

See our latest analysis for Desktop

It'll come as no surprise then, to learn that the analysts have cut their price target 5.1% to R$26.13. 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. The most optimistic Desktop analyst has a price target of R$40.00 per share, while the most pessimistic values it at R$8.30. With such a wide range in price targets, the analysts are almost certainly betting on widely diverse outcomes for the underlying business. With this in mind, we wouldn't rely too heavily on the consensus price target, as it is just an average and analysts clearly have some deeply divergent views on 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. We would highlight that Desktop's revenue growth is expected to slow, with the forecast 90% annualised growth rate until the end of 2022 being well below the historical 136% growth over the last year. Juxtapose this against the other companies in the industry with analyst coverage, which are forecast to grow their revenues (in aggregate) 8.8% per year. Even after the forecast slowdown in growth, it seems obvious that Desktop is also expected to grow faster than the wider industry.

The Bottom Line

The biggest issue in the new estimates is that analysts have reduced their earnings per share estimates, suggesting business headwinds lay ahead for Desktop. While analysts did downgrade their revenue estimates, these forecasts still imply revenues will perform better than the wider market. The consensus price target fell measurably, with analysts seemingly not reassured by recent business developments, leading to a lower estimate of Desktop's future valuation. Overall, given the drastic downgrade to this year's forecasts, we'd be feeling a little more wary of Desktop going forwards.

As you can see, the analysts clearly aren't bullish, and there might be good reason for that. We've identified some potential issues with Desktop's financials, such as concerns around earnings quality. For more information, you can click here to discover this and the 2 other warning signs we've identified.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. 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.