Earnings Release: Here's Why Analysts Cut Their Semrush Holdings, Inc. (NYSE:SEMR) Price Target To US$11.33

It's been a sad week for Semrush Holdings, Inc. (NYSE:SEMR), who've watched their investment drop 13% to US$8.24 in the week since the company reported its quarterly result. Semrush Holdings reported revenues of US$71m, in line with expectations, but it unfortunately also reported (statutory) losses of US$0.07 per share, which were slightly larger than expected. The analysts typically update their forecasts at each earnings report, and we can judge from their estimates whether their view of the company has changed or if there are any new concerns to be aware of. So we gathered the latest post-earnings forecasts to see what estimates suggest is in store for next year.

View our latest analysis for Semrush Holdings

Taking into account the latest results, the consensus forecast from Semrush Holdings' seven analysts is for revenues of US$307.1m in 2023, which would reflect a solid 15% improvement in sales compared to the last 12 months. The loss per share is expected to greatly reduce in the near future, narrowing 81% to US$0.054. Yet prior to the latest earnings, the analysts had been forecasting revenues of US$307.1m and losses of US$0.054 per share in 2023.

The analysts trimmed their valuations, with the average price target falling 12% to US$11.33, with the ongoing losses seemingly weighing on sentiment, despite no real changes to the earnings forecasts. 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. The most optimistic Semrush Holdings analyst has a price target of US$14.00 per share, while the most pessimistic values it at US$9.00. There are definitely some different views on the stock, but the range of estimates is not wide enough as to imply that the situation is unforecastable, in our view.

Of course, another way to look at these forecasts is to place them into context against the industry itself. We would highlight that Semrush Holdings' revenue growth is expected to slow, with the forecast 20% annualised growth rate until the end of 2023 being well below the historical 31% growth over the last year. By way of comparison, the other companies in this industry with analyst coverage are forecast to grow their revenue at 12% annually. Even after the forecast slowdown in growth, it seems obvious that Semrush Holdings is also expected to grow faster than the wider industry.

The Bottom Line

The most obvious conclusion is that the analysts made no changes to their forecasts for a loss next year. Fortunately, they also reconfirmed their revenue numbers, suggesting sales are tracking in line with expectations - and our data suggests that revenues are 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.

With that in mind, we wouldn't be too quick to come to a conclusion on Semrush Holdings. Long-term earnings power is much more important than next year's profits. We have estimates - from multiple Semrush Holdings analysts - going out to 2025, and you can see them free on our platform here.

That said, it's still necessary to consider the ever-present spectre of investment risk. We've identified 2 warning signs with Semrush Holdings , and understanding these should be part of your investment process.

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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.