Analyst Forecasts Just Became More Bearish On Phunware, Inc. (NASDAQ:PHUN)

The analysts covering Phunware, Inc. (NASDAQ:PHUN) delivered a dose of negativity to shareholders today, by making a substantial revision to their statutory forecasts for next year. There was a fairly draconian cut to their revenue estimates, perhaps an implicit admission that previous forecasts were much too optimistic.

Following the downgrade, the most recent consensus for Phunware from its four analysts is for revenues of US$28m in 2023 which, if met, would be a substantial 24% increase on its sales over the past 12 months. The loss per share is anticipated to greatly reduce in the near future, narrowing 62% to US$0.27. Yet before this consensus update, the analysts had been forecasting revenues of US$32m and losses of US$0.24 per share in 2023. So there's been quite a change-up of views after the recent consensus updates, with the analysts making a serious cut to their revenue forecasts while also expecting losses per share to increase.

Our analysis indicates that PHUN is potentially overvalued!

The consensus price target fell 11% to US$3.44, with the analysts clearly concerned about the company following the weaker revenue and earnings outlook. 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. Currently, the most bullish analyst values Phunware at US$5.00 per share, while the most bearish prices it at US$2.50. This is a fairly broad spread of estimates, suggesting that the analysts are forecasting a wide range of possible outcomes for the business.

Of course, another way to look at these forecasts is to place them into context against the industry itself. One thing stands out from these estimates, which is that Phunware is forecast to grow faster in the future than it has in the past, with revenues expected to display 19% annualised growth until the end of 2023. If achieved, this would be a much better result than the 20% annual decline over the past five years. By contrast, our data suggests that other companies (with analyst coverage) in the industry are forecast to see their revenue grow 13% per year. So it looks like Phunware is expected to grow faster than its competitors, at least for a while.

The Bottom Line

The most important thing to note from this downgrade is that the consensus increased its forecast losses next year, suggesting all may not be well at Phunware. Unfortunately, analysts also downgraded their revenue estimates, although our data indicates revenues are expected to perform better than the wider market. Furthermore, there was a cut to the price target, suggesting that the latest news has led to more pessimism about the intrinsic value of the business. Given the stark change in sentiment, we'd understand if investors became more cautious on Phunware after today.

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 Phunware's financials, such as a short cash runway. Learn more, and discover the 2 other flags we've identified, for 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 downgrading their estimates. So you may also wish to search this free list of stocks that insiders are buying.

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

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.