Stock Analysis

Earnings Release: Here's Why Analysts Cut Their Stem, Inc. (NYSE:STEM) Price Target To US$19.00

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The analysts might have been a bit too bullish on Stem, Inc. (NYSE:STEM), given that the company fell short of expectations when it released its full-year results last week. Revenues came in at US$127m, missing analyst expectations by 13%. Statutory losses per share fell slightly short, coming in at US$0.96, 5.9% below what the analysts had predicted. 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.

Check out our latest analysis for Stem

NYSE:STEM Earnings and Revenue Growth February 27th 2022

Taking into account the latest results, the current consensus from Stem's four analysts is for revenues of US$387.8m in 2022, which would reflect a major 204% increase on its sales over the past 12 months. Per-share losses are expected to explode, reaching US$0.80 per share. Before this latest report, the consensus had been expecting revenues of US$408.2m and US$0.29 per share in losses. So it's pretty clear the analysts have mixed opinions on Stem after this update; revenues were downgraded and per-share losses expected to increase.

The consensus price target fell 30% to US$19.00, with the analysts clearly concerned about the company following the weaker revenue and earnings outlook. 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 Stem at US$28.00 per share, while the most bearish prices it at US$10.00. 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. It's clear from the latest estimates that Stem's rate of growth is expected to accelerate meaningfully, with the forecast 204% annualised revenue growth to the end of 2022 noticeably faster than its historical growth of 68% p.a. over the past three years. Compare this with other companies in the same industry, which are forecast to grow their revenue 10% annually. Factoring in the forecast acceleration in revenue, it's pretty clear that Stem is expected to grow much faster than its industry.

The Bottom Line

The most important thing to note is the forecast of increased losses next year, suggesting all may not be well at Stem. Regrettably, they also downgraded their revenue estimates, but the latest forecasts still imply the business will grow faster than the wider industry. The consensus price target fell measurably, with the analysts seemingly not reassured by the latest results, leading to a lower estimate of Stem's future valuation.

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 Stem going out to 2024, and you can see them free on our platform here..

Plus, you should also learn about the 2 warning signs we've spotted with Stem .

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