Serko Limited (NZSE:SKO) Just Reported And Analysts Have Been Cutting Their Estimates

It's been a mediocre week for Serko Limited (NZSE:SKO) shareholders, with the stock dropping 16% to NZ$4.05 in the week since its latest annual results. Revenues were NZ$18m, with Serko reporting some 9.3% below analyst expectations. Following the result, the 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. Readers will be glad to know we've aggregated the latest statutory forecasts to see whether the analysts have changed their mind on Serko after the latest results.

Check out our latest analysis for Serko

Following the latest results, Serko's six analysts are now forecasting revenues of NZ$40.8m in 2023. This would be a major 129% improvement in sales compared to the last 12 months. The loss per share is expected to greatly reduce in the near future, narrowing 26% to NZ$0.22. Before this earnings announcement, the analysts had been modelling revenues of NZ$51.9m and losses of NZ$0.16 per share in 2023. So there's been quite a change-up of views after the recent consensus updates, withthe analysts making a serious cut to their revenue outlook while also expecting losses per share to increase.

There was no major change to the consensus price target of NZ$6.34, signalling that the business is performing roughly in line with expectations, despite lower earnings per share forecasts. That's not the only conclusion we can draw from this data however, as some investors also like to consider the spread in estimates when evaluating analyst price targets. The most optimistic Serko analyst has a price target of NZ$8.95 per share, while the most pessimistic values it at NZ$4.50. Note the wide gap in analyst price targets? This implies to us that there is a fairly broad range of possible scenarios for the underlying business.

These estimates are interesting, but it can be useful to paint some more broad strokes when seeing how forecasts compare, both to the Serko's past performance and to peers in the same industry. For example, we noticed that Serko's rate of growth is expected to accelerate meaningfully, with revenues forecast to exhibit 129% growth to the end of 2023 on an annualised basis. That is well above its historical decline of 0.7% a year over the past five years. Compare this against analyst estimates for the broader industry, which suggest that (in aggregate) industry revenues are expected to grow 17% annually. So it looks like Serko is expected to grow faster than its competitors, at least for a while.

The Bottom Line

The most important thing to take away is that the analysts increased their loss per share estimates for next year. They also downgraded their revenue estimates, although industry data suggests that Serko's revenues are expected to grow faster than the wider industry. There was no real change to the consensus price target, suggesting that the intrinsic value of the business has not undergone any major changes with the latest estimates.

With that in mind, we wouldn't be too quick to come to a conclusion on Serko. Long-term earnings power is much more important than next year's profits. At Simply Wall St, we have a full range of analyst estimates for Serko going out to 2025, and you can see them free on our platform here..

Don't forget that there may still be risks. For instance, we've identified 3 warning signs for Serko that you should be aware of.

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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.