The latest analyst coverage could presage a bad day for Synacor, Inc. (NASDAQ:SYNC), with the analysts making across-the-board cuts to their statutory estimates that might leave shareholders a little shell-shocked. Revenue and earnings per share (EPS) forecasts were both revised downwards, with analysts seeing grey clouds on the horizon.
Following the latest downgrade, the four analysts covering Synacor provided consensus estimates of US$86m revenue in 2020, which would reflect a disturbing 23% decline on its sales over the past 12 months. Losses are expected to increase slightly, to US$0.30 per share. Yet before this consensus update, the analysts had been forecasting revenues of US$99m and losses of US$0.23 per share in 2020. Ergo, there’s been a clear change in sentiment, with the analysts administering a notable cut to this year’s revenue estimates, while at the same time increasing their loss per share forecasts.
The consensus price target fell 7.0% to US$2.22, with the analysts clearly concerned about the company following the weaker revenue and earnings outlook. There’s another way to think about price targets though, and that’s to look at the range of price targets put forward by analysts, because a wide range of estimates could suggest a diverse view on possible outcomes for the business. There are some variant perceptions on Synacor, with the most bullish analyst valuing it at US$3.00 and the most bearish at US$1.65 per share. This is a fairly broad spread of estimates, suggesting that the analysts are forecasting a wide range of possible outcomes for the business.
These estimates are interesting, but it can be useful to paint some more broad strokes when seeing how forecasts compare, both to the Synacor’s past performance and to peers in the same industry. We would highlight that sales are expected to reverse, with the forecast 23% revenue decline a notable change from historical growth of 4.4% 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% next year. So although its revenues are forecast to shrink, this cloud does not come with a silver lining – Synacor is expected to lag the wider industry.
The Bottom Line
The most important thing to take away is that analysts increased their loss per share estimates for this year. Unfortunately analysts also downgraded their revenue estimates, and industry data suggests that Synacor’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 Synacor going out to 2023, 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.
If you spot an error that warrants correction, please contact the editor at email@example.com. This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. Simply Wall St has no position in the stocks mentioned.
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