Analysts Have Been Trimming Their One97 Communications Limited (NSE:PAYTM) Price Target After Its Latest Report

It's been a good week for One97 Communications Limited (NSE:PAYTM) shareholders, because the company has just released its latest annual results, and the shares gained 4.7% to ₹619. The statutory results were mixed overall, with revenues of ₹50b in line with analyst forecasts, but losses of ₹38.00 per share, some 5.2% larger than the analysts were predicting. 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. We thought readers would find it interesting to see the analysts latest (statutory) post-earnings forecasts for next year.

See our latest analysis for One97 Communications

After the latest results, the seven analysts covering One97 Communications are now predicting revenues of ₹76.6b in 2023. If met, this would reflect a major 54% improvement in sales compared to the last 12 months. Per-share losses are predicted to creep up to ₹37.77. Yet prior to the latest earnings, the analysts had been forecasting revenues of ₹73.4b and losses of ₹38.27 per share in 2023.

The analysts trimmed their valuations, with the average price target falling 17% to ₹872, with the ongoing losses clearly weighing on sentiment despite the upgraded revenue estimates. 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 One97 Communications, with the most bullish analyst valuing it at ₹1,400 and the most bearish at ₹450 per share. So we wouldn't be assigning too much credibility to analyst price targets in this case, because there are clearly some widely different views on what kind of performance this business can generate. With this in mind, we wouldn't rely too heavily the consensus price target, as it is just an average and analysts clearly have some deeply divergent views on the business.

Looking at the bigger picture now, one of the ways we can make sense of these forecasts is to see how they measure up against both past performance and industry growth estimates. The analysts are definitely expecting One97 Communications' growth to accelerate, with the forecast 54% annualised growth to the end of 2023 ranking favourably alongside historical growth of 11% per annum over the past three years. By contrast, our data suggests that other companies (with analyst coverage) in a similar industry are forecast to grow their revenue at 11% per year. Factoring in the forecast acceleration in revenue, it's pretty clear that One97 Communications is expected to grow much faster than its industry.

The Bottom Line

The most important thing to take away is that the analysts reconfirmed their loss per share estimates for next year. Happily, they also upgraded their revenue estimates, and are forecasting revenues 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.

Keeping that in mind, we still think that the longer term trajectory of the business is much more important for investors to consider. We have estimates - from multiple One97 Communications analysts - going out to 2025, and you can see them free on our platform here.

Before you take the next step you should know about the 2 warning signs for One97 Communications 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.