Arlo Technologies, Inc. (NYSE:ARLO) investors will be delighted, with the company turning in some strong numbers with its latest results. Sales crushed expectations at US$110m, beating expectations by 21%. Arlo Technologies reported a statutory loss of US$0.22 per share, which - although not amazing - was much smaller than the analysts predicted. 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.
Taking into account the latest results, the current consensus from Arlo Technologies' four analysts is for revenues of US$411.0m in 2021, which would reflect a notable 14% increase on its sales over the past 12 months. Losses are expected to hold steady at around US$1.02. Before this latest report, the consensus had been expecting revenues of US$427.3m and US$1.16 per share in losses. Although the revenue estimates have fallen somewhat, Arlo Technologies'future looks a little different to the past, with a the loss per share forecasts in particular.
There was a decent 59% increase in the price target to US$7.00, with the analysts clearly signalling that the expected reduction in losses is a positive, despite a weaker revenue outlook. That's not the only conclusion we can draw from this data however, as some investors also like to consider the spread in estimates when evaluating analyst price targets. Currently, the most bullish analyst values Arlo Technologies at US$8.00 per share, while the most bearish prices it at US$6.00. Still, with such a tight range of estimates, it suggeststhe analysts have a pretty good idea of what they think the company is worth.
Of course, another way to look at these forecasts is to place them into context against the industry itself. One thing stands out from these estimates, which is that Arlo Technologies is forecast to grow faster in the future than it has in the past, with revenues expected to grow 14%. If achieved, this would be a much better result than the 8.7% annual decline over the past year. Compare this against analyst estimates for the wider industry, which suggest that (in aggregate) industry revenues are expected to grow 7.6% next year. Not only are Arlo Technologies' revenues expected to improve, it seems that the analysts are also expecting it to grow faster than the wider industry.
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. Yet - earnings are more important to the intrinsic value of the business. We note an upgrade to the price target, suggesting that the analysts believes the intrinsic value of the business is likely to improve over time.
With that in mind, we wouldn't be too quick to come to a conclusion on Arlo Technologies. Long-term earnings power is much more important than next year's profits. We have forecasts for Arlo Technologies going out to 2024, and you can see them free on our platform here.
It is also worth noting that we have found 3 warning signs for Arlo Technologies that you need to take into consideration.
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. 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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