Youdao, Inc. (NYSE:DAO) Just Released Its Third-Quarter Results And Analysts Are Updating Their Estimates

Shareholders of Youdao, Inc. (NYSE:DAO) will be pleased this week, given that the stock price is up 19% to US$31.47 following its latest quarterly results. The results were positive, with revenue coming in at CN¥896m, beating analyst expectations by 7.5%. This is an important time for investors, as they can track a company's performance in its report, look at what experts are forecasting for next year, and see if there has been any change to expectations for the business. We thought readers would find it interesting to see the analysts latest (statutory) post-earnings forecasts for next year.

See our latest analysis for Youdao

Taking into account the latest results, the consensus forecast from Youdao's nine analysts is for revenues of CN¥5.86b in 2021, which would reflect a major 137% improvement in sales compared to the last 12 months. Losses are expected to increase substantially, hitting CN¥15.63 per share. Before this earnings announcement, the analysts had been modelling revenues of CN¥5.69b and losses of CN¥12.00 per share in 2021. So it's pretty clear the analysts have mixed opinions on Youdao even after this update; although they upped their revenue numbers, it came at the cost of a per-share losses.

There was no major change to the consensus price target of CN¥273, with growing revenues seemingly enough to offset the concern of growing losses. 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 Youdao analyst has a price target of CN¥46.88 per share, while the most pessimistic values it at CN¥30.09. With such a narrow range of valuations, the analysts apparently share similar views on what they think the business is worth.

One way to get more context on these forecasts is to look at how they compare to both past performance, and how other companies in the same industry are performing. The analysts are definitely expecting Youdao's growth to accelerate, with the forecast 137% growth ranking favourably alongside historical growth of 55% per annum over the past three years. Compare this with other companies in the same industry, which are forecast to grow their revenue 23% next year. Factoring in the forecast acceleration in revenue, it's pretty clear that Youdao is expected to grow much faster than its industry.

The Bottom Line

The most important thing to take away is that the analysts increased their loss per share estimates for next year. Pleasantly, they also upgraded their revenue estimates, and their forecasts suggest the business is 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.

Following on from that line of thought, we think that the long-term prospects of the business are much more relevant than next year's earnings. We have forecasts for Youdao 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 Youdao .

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This article by Simply Wall St is general in nature. 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.
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