Some Analysts Just Cut Their Smith Micro Software, Inc. (NASDAQ:SMSI) Estimates

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

Following the latest downgrade, the current consensus, from the three analysts covering Smith Micro Software, is for revenues of US$22m in 2024, which would reflect a concerning 29% reduction in Smith Micro Software's sales over the past 12 months. Losses are expected to increase slightly, to US$4.75 per share. However, before this estimates update, the consensus had been expecting revenues of US$28m and US$4.67 per share in losses. 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 making no real change to the loss per share numbers.

Check out our latest analysis for Smith Micro Software

The consensus price target fell 14% to US$9.17, with the analysts clearly concerned about the weaker revenue outlook and expectation of ongoing losses.

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. Over the past five years, revenues have declined around 1.7% annually. Worse, forecasts are essentially predicting the decline to accelerate, with the estimate for an annualised 49% decline in revenue until the end of 2024. Compare this against analyst estimates for companies in the broader industry, which suggest that revenues (in aggregate) are expected to grow 12% annually. So it's pretty clear that, while it does have declining revenues, the analysts also expect Smith Micro Software to suffer worse than the wider industry.

The Bottom Line

Unfortunately analysts also downgraded their revenue estimates, and industry data suggests that Smith Micro Software's revenues are expected to grow slower 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 Smith Micro Software after today.

With that said, the long-term trajectory of the company's earnings is a lot more important than next year. At Simply Wall St, we have a full range of analyst estimates for Smith Micro Software going out to 2026, and you can see them free on our platform here.

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 backed by insiders.

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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.