It's been a pretty great week for Smith Micro Software, Inc. (NASDAQ:SMSI) shareholders, with its shares surging 11% to US$2.60 in the week since its latest quarterly results. It was a pretty bad result overall; while revenues were in line with expectations at US$5.8m, statutory losses exploded to US$3.28 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. We've gathered the most recent statutory forecasts to see whether the analysts have changed their earnings models, following these results.

Taking into account the latest results, the three analysts covering Smith Micro Software provided consensus estimates of US$29.3m revenue in 2024, which would reflect a considerable 18% decline over the past 12 months. The loss per share is expected to greatly reduce in the near future, narrowing 47% to US$2.67. Before this earnings announcement, the analysts had been modelling revenues of US$30.3m and losses of US$2.70 per share in 2024.

The analysts have cut their price target 11% to US$14.67per share, signalling that the declining revenue and ongoing losses are contributing to the lower valuation. Fixating on a single price target can be unwise though, since the consensus target is effectively the average of analyst price targets. As a result, some investors like to look at the range of estimates to see if there are any diverging opinions on the company's valuation. There are some variant perceptions on Smith Micro Software, with the most bullish analyst valuing it at US$24.00 and the most bearish at US$8.00 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.

Taking a look at the bigger picture now, one of the ways we can understand these forecasts is to see how they compare to both past performance and industry growth estimates. These estimates imply that revenue is expected to slow, with a forecast annualised decline of 23% by the end of 2024. This indicates a significant reduction from annual growth of 2.3% over the last five years. By contrast, our data suggests that other companies (with analyst coverage) in the same industry are forecast to see their revenue grow 13% annually for the foreseeable future. It's pretty clear that Smith Micro Software's revenues are expected to perform substantially worse 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. On the negative side, they also downgraded their revenue estimates, and forecasts imply they will perform worse 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.

Following on from that line of thought, we think that the long-term prospects of the business are much more relevant than next year's earnings. At Simply Wall St, we have a full range of analyst estimates for Smith Micro Software going out to 2026, and you can see them free on our platform here..

Don't forget that there may still be risks. For instance, we've identified 4 warning signs for Smith Micro Software (1 can't be ignored) 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.