Analysts Just Shaved Their PubMatic, Inc. (NASDAQ:PUBM) Forecasts Dramatically

Today is shaping up negative for PubMatic, Inc. (NASDAQ:PUBM) shareholders, with the analysts delivering a substantial negative revision to next year's forecasts. Both revenue and earnings per share (EPS) estimates were cut sharply as the analysts factored in the latest outlook for the business, concluding that they were too optimistic previously.

Following the downgrade, the current consensus from PubMatic's nine analysts is for revenues of US$283m in 2023 which - if met - would reflect a meaningful 9.9% increase on its sales over the past 12 months. Statutory earnings per share are anticipated to dive 46% to US$0.45 in the same period. Prior to this update, the analysts had been forecasting revenues of US$330m and earnings per share (EPS) of US$0.82 in 2023. It looks like analyst sentiment has declined substantially, with a measurable cut to revenue estimates and a large cut to earnings per share numbers as well.

Our analysis indicates that PUBM is potentially undervalued!

It'll come as no surprise then, to learn that the analysts have cut their price target 28% to US$20.25. 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. Currently, the most bullish analyst values PubMatic at US$27.00 per share, while the most bearish prices it at US$16.00. There are definitely some different views on the stock, but the range of estimates is not wide enough as to imply that the situation is unforecastable, in our view.

Of course, another way to look at these forecasts is to place them into context against the industry itself. It's pretty clear that there is an expectation that PubMatic's revenue growth will slow down substantially, with revenues to the end of 2023 expected to display 7.8% growth on an annualised basis. This is compared to a historical growth rate of 31% over the past three years. Juxtapose this against the other companies in the industry with analyst coverage, which are forecast to grow their revenues (in aggregate) 3.4% per year. Even after the forecast slowdown in growth, it seems obvious that PubMatic is also expected to grow faster than the wider industry.

The Bottom Line

The biggest issue in the new estimates is that analysts have reduced their earnings per share estimates, suggesting business headwinds lay ahead for PubMatic. Unfortunately, analysts also downgraded their revenue estimates, although our data indicates revenues are expected to perform better than the wider market. With a serious cut to next year's expectations and a falling price target, we wouldn't be surprised if investors were becoming wary of PubMatic.

As you can see, the analysts clearly aren't bullish, and there might be good reason for that. We've identified some potential issues with PubMatic's financials, such as dilutive stock issuance over the past year. Learn more, and discover the 2 other concerns we've identified, for free on our platform here.

Another way to search for interesting companies that could be reaching an inflection point is to track whether management are buying or selling, with our free list of growing companies that insiders are buying.

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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.