Investors in Valens Semiconductor Ltd. (NYSE:VLN) had a good week, as its shares rose 2.1% to close at US$2.46 following the release of its quarterly results. Revenues of US$12m beat expectations by a respectable 4.4%, although statutory losses per share increased. Valens Semiconductor lost US$0.10, which was 33% more than what the analysts had included in their models. 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 gathered the latest post-earnings forecasts to see what estimates suggest is in store for next year.
Taking into account the latest results, the current consensus, from the three analysts covering Valens Semiconductor, is for revenues of US$56.2m in 2024. This implies a concerning 22% reduction in Valens Semiconductor's revenue over the past 12 months. Per-share losses are expected to explode, reaching US$0.29 per share. Yet prior to the latest earnings, the analysts had been forecasting revenues of US$54.4m and losses of US$0.22 per share in 2024. While this year's revenue estimates increased, there was also a considerable increase to loss per share expectations, suggesting the consensus has a bit of a mixed view on the stock.
Spiting the revenue upgrading, the average price target fell 8.3% to US$3.67, clearly signalling that higher forecast losses are a valuation concern. 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 Valens Semiconductor analyst has a price target of US$4.00 per share, while the most pessimistic values it at US$3.00. Even so, with a relatively close grouping of estimates, it looks like the analysts are quite confident in their valuations, suggesting Valens Semiconductor is an easy business to forecast or the the analysts are all using similar assumptions.
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. We would highlight that revenue is expected to reverse, with a forecast 28% annualised decline to the end of 2024. That is a notable change from historical growth of 12% over the last three years. By contrast, our data suggests that other companies (with analyst coverage) in the same industry are forecast to see their revenue grow 17% annually for the foreseeable future. So although its revenues are forecast to shrink, this cloud does not come with a silver lining - Valens Semiconductor is expected to lag the wider industry.
The Bottom Line
The most important thing to note is the forecast of increased losses next year, suggesting all may not be well at Valens Semiconductor. Fortunately, they also upgraded their revenue estimates, although our data indicates it is expected to 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.
Keeping that in mind, we still think that the longer term trajectory of the business is much more important for investors to consider. We have estimates - from multiple Valens Semiconductor analysts - going out to 2026, and you can see them free on our platform here.
Plus, you should also learn about the 2 warning signs we've spotted with Valens Semiconductor .
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