Earnings Release: Here's Why Analysts Cut Their Phunware, Inc. (NASDAQ:PHUN) Price Target To US$3.94

Phunware, Inc. (NASDAQ:PHUN) missed earnings with its latest second-quarter results, disappointing overly-optimistic forecasters. It was a pretty negative result overall, with revenues of US$5.5m missing analyst predictions by 5.4%. Worse, the business reported a statutory loss of US$0.17 per share, much larger than the analysts had forecast prior to the result. Earnings are an important time for investors, as they can track a company's performance, look at what the analysts are forecasting for next year, and see if there's been a change in sentiment towards the company. Readers will be glad to know we've aggregated the latest statutory forecasts to see whether the analysts have changed their mind on Phunware after the latest results.

Check out our latest analysis for Phunware

Taking into account the latest results, the most recent consensus for Phunware from five analysts is for revenues of US$25.0m in 2022 which, if met, would be a huge 26% increase on its sales over the past 12 months. The loss per share is expected to greatly reduce in the near future, narrowing 25% to US$0.48. Yet prior to the latest earnings, the analysts had been forecasting revenues of US$26.1m and losses of US$0.30 per share in 2022. So it's pretty clear the analysts have mixed opinions on Phunware after this update; revenues were downgraded and per-share losses expected to increase.

The consensus price target fell 14% to US$3.94, with the analysts clearly concerned about the company following the weaker revenue and earnings outlook. The consensus price target is just an average of individual analyst targets, so - it could be handy to see how wide the range of underlying estimates is. Currently, the most bullish analyst values Phunware at US$6.00 per share, while the most bearish prices it at US$3.00. Note the wide gap in analyst price targets? This implies to us that there is a fairly broad range of possible scenarios for the underlying business.

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. 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 60% annualised growth until the end of 2022. If achieved, this would be a much better result than the 19% annual decline over the past three years. By contrast, our data suggests that other companies (with analyst coverage) in the industry are forecast to see their revenue grow 14% 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 take away is that the analysts increased their loss per share estimates for next year. They also downgraded their revenue estimates, although industry data suggests that Phunware's revenues are expected to grow faster than the wider industry. Furthermore, the analysts also cut their price targets, suggesting that the latest news has led to greater pessimism about the intrinsic value of the business.

Following on from that line of thought, we think that the long-term prospects of the business are much more relevant than next year's earnings. We have forecasts for Phunware going out to 2024, and you can see them free on our platform here.

We don't want to rain on the parade too much, but we did also find 3 warning signs for Phunware that you need to be mindful 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.