AquaBounty Technologies, Inc. (NASDAQ:AQB) missed earnings with its latest third-quarter results, disappointing overly-optimistic forecasters. Earnings missed the mark badly, with revenues of US$68k falling 94% short of expectations. Losses correspondingly increased, with a US$0.09 per-share statutory loss some 12% larger than what the analysts expected. The analysts typically update their forecasts at each earnings report, and we can judge from their estimates whether their view of the company has changed or if there are any new concerns to be aware of. So we gathered the latest post-earnings forecasts to see what estimates suggest is in store for next year.
Following the latest results, AquaBounty Technologies’ three analysts are now forecasting revenues of US$7.34m in 2021. This would be a huge 5,825% improvement in sales compared to the last 12 months. The loss per share is expected to greatly reduce in the near future, narrowing 50% to US$0.23. Before this earnings announcement, the analysts had been modelling revenues of US$11.0m and losses of US$0.24 per share in 2021. We can see there’s definitely been a change in sentiment in this update, with the analysts administering a meaningful downgrade to next year’s revenue estimates, while at the same time reducing their loss estimates.
The consensus price target rose 7.4% to US$4.83, with the analysts increasingly optimistic about shrinking losses, despite the expected decline in sales. 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. Currently, the most bullish analyst values AquaBounty Technologies at US$5.00 per share, while the most bearish prices it at US$4.50. With such a narrow range of valuations, the analysts apparently share similar views on what they think the business is worth.
Of course, another way to look at these forecasts is to place them into context against the industry itself. The analysts are definitely expecting AquaBounty Technologies’ growth to accelerate, with the forecast exponential growth ranking favourably alongside historical growth of 23% per annum over the past three years. By contrast, our data suggests that other companies (with analyst coverage) in a similar industry are forecast to grow their revenue at 20% per year. Factoring in the forecast acceleration in revenue, it’s pretty clear that AquaBounty Technologies is expected to grow much faster than its industry.
The Bottom Line
The most obvious conclusion is that the analysts made no changes to their forecasts for a loss next year. Regrettably, they also downgraded their revenue estimates, but the latest forecasts still imply the business will grow faster than the wider industry. With that said, earnings are more important to the long-term 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 AquaBounty Technologies. Long-term earnings power is much more important than next year’s profits. We have forecasts for AquaBounty Technologies going out to 2022, and you can see them free on our platform here.
And what about risks? Every company has them, and we’ve spotted 4 warning signs for AquaBounty Technologies (of which 2 are potentially serious!) you should know about.
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.