Freshworks Inc. (NASDAQ:FRSH) First-Quarter Results Just Came Out: Here's What Analysts Are Forecasting For This Year

Freshworks Inc. (NASDAQ:FRSH) just released its latest first-quarter results and things are looking bullish. Results overall were solid, with revenues arriving 2.6% better than analyst forecasts at US$138m. Higher revenues also resulted in substantially lower statutory losses which, at US$0.15 per share, were 2.6% smaller than the analysts expected. The analysts typically update their forecasts at each earnings report, and we can judge from their estimates whether their view of the company has changed or if there are any new concerns to be aware of. So we collected the latest post-earnings statutory consensus estimates to see what could be in store for next year.

See our latest analysis for Freshworks

After the latest results, the 16 analysts covering Freshworks are now predicting revenues of US$586.0m in 2023. If met, this would reflect a meaningful 12% improvement in sales compared to the last 12 months. Losses are predicted to fall substantially, shrinking 21% to US$0.61. Before this latest report, the consensus had been expecting revenues of US$582.1m and US$0.68 per share in losses. It looks like there's been a modest increase in sentiment in the recent updates, with the analysts becoming a bit more optimistic in their predictions for losses per share, even though the revenue numbers were unchanged.

The average price target held steady at US$17.80, seeming to indicate that business is performing in line with expectations. Fixating on a single price target can be unwise though, since the consensus target is effectively the average of analyst price targets. As a result, some investors like to look at the range of estimates to see if there are any diverging opinions on the company's valuation. There are some variant perceptions on Freshworks, with the most bullish analyst valuing it at US$25.00 and the most bearish at US$14.00 per share. This is a fairly broad spread of estimates, suggesting that analysts are forecasting a wide range of possible outcomes for the business.

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 forecasts are more or less bullish relative to other companies in the industry. We would highlight that Freshworks' revenue growth is expected to slow, with the forecast 17% annualised growth rate until the end of 2023 being well below the historical 29% growth over the last year. By way of comparison, the other companies in this industry with analyst coverage are forecast to grow their revenue at 12% annually. Even after the forecast slowdown in growth, it seems obvious that Freshworks is also expected to grow faster than the wider industry.

The Bottom Line

The most obvious conclusion is that the analysts made no changes to their forecasts for a loss next year. Happily, there were no major changes to revenue forecasts, with the business still expected to grow faster than the wider industry. The consensus price target held steady at US$17.80, with the latest estimates not enough to have an impact on their price targets.

With that in mind, we wouldn't be too quick to come to a conclusion on Freshworks. Long-term earnings power is much more important than next year's profits. We have forecasts for Freshworks going out to 2025, and you can see them free on our platform here.

You still need to take note of risks, for example - Freshworks has 2 warning signs we think you should be aware of.

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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.