AppFolio, Inc. Just Beat Earnings Expectations: Here's What Analysts Think Will Happen Next

It's been a good week for AppFolio, Inc. (NASDAQ:APPF) shareholders, because the company has just released its latest third-quarter results, and the shares gained 9.0% to US$94.96. It looks like a credible result overall - although revenues of US$68m were what analysts expected, AppFolio surprised by delivering a profit of US$0.14 per share, an impressive 62% above what analysts had forecast. Earnings are an important time for investors, as they can track a company's performance, look at what top analysts are forecasting for next year, and see if there's been a change in sentiment towards the company. We've gathered the most recent forecasts to see whether analysts have changed their earnings models, following these results.

See our latest analysis for AppFolio

Taking into account the latest results, the most recent consensus for AppFolio from two analysts is for revenues of US$326m in 2020, which is a major 36% increase on its sales over the past 12 months. Earnings per share are forecast to tumble 50% to US$0.51 in the same period. Before this earnings report, analysts had been forecasting revenues of US$321m and earnings per share (EPS) of US$0.73 in 2020. Analysts seem to have become more bearish following the latest results. While there were no changes to revenue forecasts, there was a pretty serious reduction to EPS estimates.

Despite cutting their earnings forecasts, analysts have lifted their price target 15% to US$77.00, suggesting that these impacts are not expected to weigh on the stock's value in the long term.

Another way we can view these estimates is in the context of the bigger picture, such as how the forecasts stack up against past performance, and whether analysts are more or less bullish relative to other companies in the market. Next year brings more of the same, according to analysts, with revenue forecast to grow 36%, in line with its 30% annual growth over the past five years. Compare this with the wider market, which analyst estimates (in aggregate) suggest will see revenues grow 12% next year. So it's pretty clear that AppFolio is forecast to grow substantially faster than its market.

The Bottom Line

The most important thing to take away is that analysts downgraded their earnings per share estimates, showing that there has been a clear decline in sentiment following these results. Fortunately, analysts also reconfirmed their revenue estimates, suggesting sales are tracking in line with expectations - and our data does suggest that AppFolio's revenues are expected to grow faster than the wider market. Analysts also upgraded their price target, suggesting that analysts believe the intrinsic value of the business is likely to improve over time.

Still, the long-term prospects of the business are much more relevant than next year's earnings. We have analyst estimates for AppFolio going out as far as 2021, and you can see them free on our platform here.

It might also be worth considering whether AppFolio's debt load is appropriate, using our debt analysis tools on the Simply Wall St platform, here.

We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material.

If you spot an error that warrants correction, please contact the editor at editorial-team@simplywallst.com. 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. Simply Wall St has no position in the stocks mentioned. Thank you for reading.