Upgrade: Analysts Just Made A Sizeable Increase To Their Silicon Motion Technology Corporation (NASDAQ:SIMO) Forecasts

Shareholders in Silicon Motion Technology Corporation (NASDAQ:SIMO) may be thrilled to learn that the analysts have just delivered a major upgrade to their near-term forecasts. The analysts greatly increased their revenue estimates, suggesting a stark improvement in business fundamentals. Silicon Motion Technology has also found favour with investors, with the stock up a noteworthy 29% to US$77.54 over the past week. We'll be curious to see if these new estimates convince the market to lift the stock price higher still.

Following the upgrade, the latest consensus from Silicon Motion Technology's eleven analysts is for revenues of US$903m in 2021, which would reflect a substantial 34% improvement in sales compared to the last 12 months. Per-share earnings are expected to soar 74% to US$5.49. Prior to this update, the analysts had been forecasting revenues of US$814m and earnings per share (EPS) of US$4.47 in 2021. So we can see there's been a pretty clear increase in analyst sentiment in recent times, with both revenues and earnings per share receiving a decent lift in the latest estimates.

Check out our latest analysis for Silicon Motion Technology

It will come as no surprise to learn that the analysts have increased their price target for Silicon Motion Technology 12% to US$91.64 on the back of these upgrades. 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 Silicon Motion Technology, with the most bullish analyst valuing it at US$120 and the most bearish at US$68.00 per share. These price targets show that analysts do have some differing views on the business, but the estimates do not vary enough to suggest to us that some are betting on wild success or utter failure.

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 Silicon Motion Technology's rate of growth is expected to accelerate meaningfully, with the forecast 80% annualised revenue growth to the end of 2021 noticeably faster than its historical growth of 1.6% p.a. over the past five years. By contrast, our data suggests that other companies (with analyst coverage) in a similar industry are forecast to grow their revenue at 8.4% per year. It seems obvious that, while the growth outlook is brighter than the recent past, the analysts also expect Silicon Motion Technology to grow faster than the wider industry.

The Bottom Line

The most important thing to take away from this upgrade is that analysts upgraded their earnings per share estimates for this year, expecting improving business conditions. They also upgraded their revenue estimates for this year, and sales are expected to grow faster than the wider market. Given that the consensus looks almost universally bullish, with a substantial increase to forecasts and a higher price target, Silicon Motion Technology could be worth investigating further.

With that said, the long-term trajectory of the company's earnings is a lot more important than next year. We have estimates - from multiple Silicon Motion Technology analysts - going out to 2023, and you can see them free on our platform here.

Of course, seeing company management invest large sums of money in a stock can be just as useful as knowing whether analysts are upgrading their estimates. So you may also wish to search this free list of stocks that insiders are buying.

If you’re looking to trade Silicon Motion Technology, open an account with the lowest-cost* platform trusted by professionals, Interactive Brokers. Their clients from over 200 countries and territories trade stocks, options, futures, forex, bonds and funds worldwide from a single integrated account. Promoted

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.
^*Interactive Brokers Rated Lowest Cost Broker by StockBrokers.com Annual Online Review 2020

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.