Stock Analysis

Silicon Laboratories Inc. (NASDAQ:SLAB) Analysts Are Reducing Their Forecasts For This Year

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Today is shaping up negative for Silicon Laboratories Inc. (NASDAQ:SLAB) shareholders, with the analysts delivering a substantial negative revision to this year's forecasts. Both revenue and earnings per share (EPS) forecasts went under the knife, suggesting the analysts have soured majorly on the business.

Following the latest downgrade, the current consensus, from the nine analysts covering Silicon Laboratories, is for revenues of US$846m in 2021, which would reflect a not inconsiderable 14% reduction in Silicon Laboratories' sales over the past 12 months. Following this this downgrade, earnings are now expected to tip over into loss-making territory, with the analysts forecasting losses of US$0.79 per share in 2021. Prior to this update, the analysts had been forecasting revenues of US$1.1b and earnings per share (EPS) of US$1.51 in 2021. So we can see that the consensus has become notably more bearish on Silicon Laboratories' outlook with these numbers, making a sizeable cut to this year's revenue estimates. Furthermore, they expect the business to be loss-making this year, compared to their previous forecasts of a profit.

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NasdaqGS:SLAB Earnings and Revenue Growth July 30th 2021

There was no major change to the consensus price target of US$165, signalling that the business is performing roughly in line with expectations, despite lower earnings per share forecasts. It could also be instructive to look at the range of analyst estimates, to evaluate how different the outlier opinions are from the mean. Currently, the most bullish analyst values Silicon Laboratories at US$195 per share, while the most bearish prices it at US$125. This shows there is still some diversity in estimates, but analysts don't appear to be totally split on the stock as though it might be a success or failure situation.

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. These estimates imply that sales are expected to slow, with a forecast annualised revenue decline of 26% by the end of 2021. This indicates a significant reduction from annual growth of 6.3% over the last five years. By contrast, our data suggests that other companies (with analyst coverage) in the same industry are forecast to see their revenue grow 8.3% annually for the foreseeable future. It's pretty clear that Silicon Laboratories' revenues are expected to perform substantially worse than the wider industry.

The Bottom Line

The most important thing to take away is that analysts are expecting Silicon Laboratories to become unprofitable this year. Regrettably, they also downgraded their revenue estimates, and the latest forecasts imply the business will grow sales slower than the wider market. The lack of change in the price target is puzzling in light of the downgrade but, with a serious decline expected this year, we wouldn't be surprised if investors were a bit wary of Silicon Laboratories.

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 Silicon Laboratories' financials, such as dilutive stock issuance over the past year. For more information, you can click here to discover this and the 2 other risks we've identified.

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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