UserTesting, Inc. (NYSE:USER) Just Reported, And Analysts Assigned A US$8.55 Price Target

One of the biggest stories of last week was how UserTesting, Inc. (NYSE:USER) shares plunged 23% in the week since its latest quarterly results, closing yesterday at US$4.87. It looks like the results were pretty good overall. While revenues of US$48m were in line with analyst predictions, statutory losses were much smaller than expected, with UserTesting losing US$0.13 per share. 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 collected the latest post-earnings statutory consensus estimates to see what could be in store for next year.

Check out our latest analysis for UserTesting

After the latest results, the eleven analysts covering UserTesting are now predicting revenues of US$192.2m in 2022. If met, this would reflect a decent 10% improvement in sales compared to the last 12 months. Losses are forecast to balloon 35% to US$0.57 per share. Before this latest report, the consensus had been expecting revenues of US$197.8m and US$0.64 per share in losses. While the revenue estimates fell, sentiment seems to have improved, with the analysts making a notable improvement in losses per share in particular.

The consensus price target fell 29% to US$8.55, with the dip in revenue estimates clearly souring sentiment, despite the forecast reduction in losses. 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 UserTesting analyst has a price target of US$9.00 per share, while the most pessimistic values it at US$8.00. With such a narrow range of valuations, the analysts apparently share similar views on what they think the business is worth.

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. It's pretty clear that there is an expectation that UserTesting's revenue growth will slow down substantially, with revenues to the end of 2022 expected to display 21% growth on an annualised basis. This is compared to a historical growth rate of 43% over the past year. By way of comparison, the other companies in this industry with analyst coverage are forecast to grow their revenue at 13% annually. So it's pretty clear that, while UserTesting's revenue growth is expected to slow, it's still expected to grow faster than the industry itself.

The Bottom Line

The most important thing to take away is that the analysts reconfirmed their loss per share estimates for next year. Regrettably, they also downgraded their revenue estimates, but the latest forecasts still imply the business will grow faster than the wider industry. Even so, earnings per share are more important to the intrinsic value of the business. 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 UserTesting going out to 2024, and you can see them free on our platform here..

We don't want to rain on the parade too much, but we did also find 3 warning signs for UserTesting (1 is a bit concerning!) that you need to be mindful 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.