Earnings Beat: Datto Holding Corp. Just Beat Analyst Forecasts, And Analysts Have Been Updating Their Models

Datto Holding Corp. (NYSE:MSP) defied analyst predictions to release its second-quarter results, which were ahead of market expectations. The company beat both earnings and revenue forecasts, with revenue of US$152m, some 2.8% above estimates, and statutory earnings per share (EPS) coming in at US$0.10, 74% ahead of expectations. Following the result, the analysts have updated their earnings model, and it would be good to know whether they think there's been a strong change in the company's prospects, or if it's business as usual. So we gathered the latest post-earnings forecasts to see what estimates suggest is in store for next year.

See our latest analysis for Datto Holding

Taking into account the latest results, the consensus forecast from Datto Holding's ten analysts is for revenues of US$610.9m in 2021, which would reflect a satisfactory 7.9% improvement in sales compared to the last 12 months. Statutory earnings per share are expected to tumble 27% to US$0.21 in the same period. Before this earnings report, the analysts had been forecasting revenues of US$599.8m and earnings per share (EPS) of US$0.12 in 2021. There was no real change to the revenue estimates, but the analysts do seem more bullish on earnings, given the massive increase in earnings per share expectations following these results.

The consensus price target was unchanged at US$33.20, implying that the improved earnings outlook is not expected to have a long term impact on value creation for shareholders. 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 Datto Holding, with the most bullish analyst valuing it at US$36.00 and the most bearish at US$30.00 per share. The narrow spread of estimates could suggest that the business' future is relatively easy to value, or thatthe analysts have a strong view on its prospects.

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. We can infer from the latest estimates that forecasts expect a continuation of Datto Holding'shistorical trends, as the 16% annualised revenue growth to the end of 2021 is roughly in line with the 15% annual revenue growth over the past year. Compare this with the broader industry, which analyst estimates (in aggregate) suggest will see revenues grow 14% annually. It's clear that while Datto Holding's revenue growth is expected to continue on its current trajectory, it's only expected to grow in line with the industry itself.

The Bottom Line

The biggest takeaway for us is the consensus earnings per share upgrade, which suggests a clear improvement in sentiment around Datto Holding's earnings potential next year. Happily, there were no real changes to sales forecasts, with the business still expected to grow in line with the overall industry. There was no real change to the consensus price target, suggesting that the intrinsic value of the business has not undergone any major changes with the latest estimates.

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 estimates - from multiple Datto Holding analysts - going out to 2023, and you can see them free on our platform here.

However, before you get too enthused, we've discovered 1 warning sign for Datto Holding that you should be aware 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.
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