Earnings Release: Here's Why Analysts Cut Their SUSE S.A. (ETR:SUSE) Price Target To €38.41

Shareholders of SUSE S.A. (ETR:SUSE) will be pleased this week, given that the stock price is up 15% to €27.22 following its latest quarterly results. Revenues were in line with expectations, at US$150m, while statutory losses ballooned to US$0.10 per share. Earnings are an important time for investors, as they can track a company's performance, look at what the analysts are forecasting for next year, and see if there's been a change in sentiment towards the company. We thought readers would find it interesting to see the analysts latest (statutory) post-earnings forecasts for next year.

See our latest analysis for SUSE

After the latest results, the seven analysts covering SUSE are now predicting revenues of US$664.9m in 2022. If met, this would reflect a decent 13% improvement in sales compared to the last 12 months. Statutory losses are forecast to balloon 99% to US$0.014 per share. Yet prior to the latest earnings, the analysts had been anticipated revenues of US$667.1m and earnings per share (EPS) of US$0.066 in 2022. So despite reconfirming their revenue estimates, the analysts are now forecasting a loss instead of a profit, which looks like a definite drop in sentiment following the latest results.

With the increase in forecast losses for next year, it's perhaps no surprise to see that the average price target dipped 8.7% to €38.41, with the analysts signalling that growing losses would be a definite concern. 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 SUSE, with the most bullish analyst valuing it at €47.15 and the most bearish at €31.14 per share. 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 SUSE shareholders.

These estimates are interesting, but it can be useful to paint some more broad strokes when seeing how forecasts compare, both to the SUSE's past performance and to peers in the same industry. We would highlight that SUSE's revenue growth is expected to slow, with the forecast 18% annualised growth rate until the end of 2022 being well below the historical 24% growth over the last year. By way of comparison, the other companies in this industry with analyst coverage are forecast to grow their revenue at 8.0% annually. Even after the forecast slowdown in growth, it seems obvious that SUSE is also expected to grow faster than the wider industry.

The Bottom Line

The biggest low-light for us was that the forecasts for SUSE dropped from profits to a loss next year. Fortunately, they also reconfirmed their revenue numbers, suggesting sales are tracking in line with expectations - and our data suggests that revenues are expected to grow faster than the wider industry. Furthermore, the analysts also cut their price targets, suggesting that the latest news has led to greater pessimism about the intrinsic value of the business.

With that said, the long-term trajectory of the company's earnings is a lot more important than next year. At Simply Wall St, we have a full range of analyst estimates for SUSE going out to 2024, and you can see them free on our platform here..

Before you take the next step you should know about the 1 warning sign for SUSE that we have uncovered.

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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.