It’s shaping up to be a tough period for Agora, Inc. (NASDAQ:API), which a week ago released some disappointing third-quarter results that could have a notable impact on how the market views the stock. It was a pretty negative result overall, with revenues of US$41m missing analyst predictions by 7.8%. Worse, the business reported a statutory loss of US$0.25 per share, much larger than the analysts had forecast prior to the result. This is an important time for investors, as they can track a company’s performance in its report, look at what experts are forecasting for next year, and see if there has been any change to expectations for the business. Readers will be glad to know we’ve aggregated the latest statutory forecasts to see whether the analysts have changed their mind on Agora after the latest results.
Following the latest results, Agora’s five analysts are now forecasting revenues of US$194.7m in 2023. This would be a huge 21% improvement in sales compared to the last 12 months. The loss per share is expected to greatly reduce in the near future, narrowing 38% to US$0.57. Before this latest report, the consensus had been expecting revenues of US$202.5m and US$0.59 per share in losses. It looks like there’s been a modest increase in sentiment in the recent updates, with the analysts becoming a bit more optimistic in their predictions for losses per share, even though the revenue numbers fell somewhat.
The consensus price target rose 5.4% to US$11.32, with the analysts increasingly optimistic about shrinking losses, despite the expected decline in sales. The consensus price target is just an average of individual analyst targets, so – it could be handy to see how wide the range of underlying estimates is. There are some variant perceptions on Agora, with the most bullish analyst valuing it at US$34.30 and the most bearish at US$3.80 per share. With such a wide range in price targets, analysts are almost certainly betting on widely divergent outcomes in the underlying business. As a result it might not be a great idea to make decisions based on the consensus price target, which is after all just an average of this wide range of estimates.
These estimates are interesting, but it can be useful to paint some more broad strokes when seeing how forecasts compare, both to the Agora’s past performance and to peers in the same industry. It’s pretty clear that there is an expectation that Agora’s revenue growth will slow down substantially, with revenues to the end of 2023 expected to display 16% growth on an annualised basis. This is compared to a historical growth rate of 26% over the past three years. Juxtapose this against the other companies in the industry with analyst coverage, which are forecast to grow their revenues (in aggregate) 13% annually. So it’s pretty clear that, while Agora’s revenue growth is expected to slow, it’s expected to grow roughly in line with the industry.
The Bottom Line
The most important thing to take away is that the analysts reconfirmed their loss per share estimates for next year. They also downgraded their revenue estimates, although as we saw earlier, forecast growth is only expected to be about the same as the wider industry. Even so, earnings per share are more important to the intrinsic value of the business. There was also a nice increase in the price target, with the analysts clearly feeling that the intrinsic value of the business is improving.
With that in mind, we wouldn’t be too quick to come to a conclusion on Agora. Long-term earnings power is much more important than next year’s profits. At Simply Wall St, we have a full range of analyst estimates for Agora going out to 2024, and you can see them free on our platform here..
Don’t forget that there may still be risks. For instance, we’ve identified 2 warning signs for Agora (1 is a bit unpleasant) 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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