Things Look Grim For Smith Micro Software, Inc. (NASDAQ:SMSI) After Today's Downgrade

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 next year. Both revenue and earnings per share (EPS) estimates were cut sharply as analysts factored in the latest outlook for the business, concluding that they were too optimistic previously.

Following the latest downgrade, the current consensus, from the three analysts covering Smith Micro Software, is for revenues of US$40m in 2024, which would reflect a not inconsiderable 9.2% reduction in Smith Micro Software's sales over the past 12 months. Losses are predicted to fall substantially, shrinking 49% to US$0.20 per share. Yet before this consensus update, the analysts had been forecasting revenues of US$48m and losses of US$0.14 per share in 2024. 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.

See our latest analysis for Smith Micro Software

The consensus price target fell 14% to US$3.17, with the analysts clearly concerned about the company following the weaker revenue and earnings outlook.

Looking at the bigger picture now, one of the ways we can make sense of these forecasts is to see how they measure up against both past performance and industry growth estimates. We would highlight that sales are expected to reverse, with a forecast 7.4% annualised revenue decline to the end of 2024. That is a notable change from historical growth of 9.4% over the last five years. Compare this with our data, which suggests that other companies in the same industry are, in aggregate, expected to see their revenue grow 12% per year. It's pretty clear that Smith Micro Software's revenues are expected to perform substantially worse than the wider industry.

The Bottom Line

The most important thing to take away is that analysts increased their loss per share estimates for next year. 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. Given the scope of the downgrades, it would not be a surprise to see the market become more wary of the business.

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 2025, and you can see them 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.

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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.