Earnings Release: Here's Why Analysts Cut Their Olo Inc. (NYSE:OLO) Price Target To US$18.80

Investors in Olo Inc. (NYSE:OLO) had a good week, as its shares rose 4.9% to close at US$11.21 following the release of its quarterly results. The results don't look great, especially considering that statutory losses grew 82% toUS$0.07 per share. Revenues of US$43m did beat expectations by 2.6%, but it looks like a bit of a cold comfort. 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. We've gathered the most recent statutory forecasts to see whether the analysts have changed their earnings models, following these results.

See our latest analysis for Olo

Taking into account the latest results, the most recent consensus for Olo from six analysts is for revenues of US$195.6m in 2022 which, if met, would be a huge 25% increase on its sales over the past 12 months. The loss per share is expected to greatly reduce in the near future, narrowing 22% to US$0.13. Before this earnings announcement, the analysts had been modelling revenues of US$193.8m and losses of US$0.067 per share in 2022. So it's pretty clear the analysts have mixed opinions on Olo even after this update; although they reconfirmed their revenue numbers, it came at the cost of a very substantial increase in per-share losses.

With the increase in forecast losses for next year, it's perhaps no surprise to see that the average price target dipped 13% to US$18.80, with the analysts signalling that growing losses would be a definite concern. 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 Olo, with the most bullish analyst valuing it at US$26.00 and the most bearish at US$12.00 per share. This is a fairly broad spread of estimates, suggesting that analysts are forecasting a wide range of possible outcomes for the business.

One way to get more context on these forecasts is to look at how they compare to both past performance, and how other companies in the same industry are performing. We can infer from the latest estimates that forecasts expect a continuation of Olo'shistorical trends, as the 35% annualised revenue growth to the end of 2022 is roughly in line with the 32% annual revenue growth over the past year. By contrast, our data suggests that other companies (with analyst coverage) in a similar industry are forecast to see their revenues grow 14% per year. So although Olo is expected to maintain its revenue growth rate, it's definitely expected to grow faster than the wider industry.

The Bottom Line

The most important thing to take away is that the analysts increased their loss per share estimates for next year. Happily, there were no major changes to revenue forecasts, with the business still 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.

Keeping that in mind, we still think that the longer term trajectory of the business is much more important for investors to consider. At Simply Wall St, we have a full range of analyst estimates for Olo going out to 2023, and you can see them free on our platform here..

You still need to take note of risks, for example - Olo has 4 warning signs we think 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.