Last week, you might have seen that AppFolio, Inc. (NASDAQ:APPF) released its quarterly result to the market. The early response was not positive, with shares down 5.6% to US$123 in the past week. It looks like a pretty bad result, all things considered. Although revenues of US$79m were in line with analyst predictions, statutory earnings fell badly short, missing estimates by 84% to hit US$0.01 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. With this in mind, we've gathered the latest statutory forecasts to see what the analysts are expecting for next year.
Taking into account the latest results, the most recent consensus for AppFolio from five analysts is for revenues of US$351.2m in 2021 which, if met, would be a meaningful 11% increase on its sales over the past 12 months. Statutory earnings per share are expected to nosedive 93% to US$0.32 in the same period. Before this earnings report, the analysts had been forecasting revenues of US$346.9m and earnings per share (EPS) of US$0.46 in 2021. The analysts seem to have become more bearish following the latest results. While there were no changes to revenue forecasts, there was a pretty serious reduction to EPS estimates.
The average price target fell 8.5% to US$115, with reduced earnings forecasts clearly tied to a lower valuation estimate. 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. There are some variant perceptions on AppFolio, with the most bullish analyst valuing it at US$135 and the most bearish at US$105 per share. With such a narrow range of valuations, the analysts apparently share similar views on what they think the business is worth.
One way to get more context on these forecasts is to look at how they compare to both past performance, and how other companies in the same industry are performing. It's pretty clear that there is an expectation that AppFolio's revenue growth will slow down substantially, with revenues to the end of 2021 expected to display 15% growth on an annualised basis. This is compared to a historical growth rate of 26% over the past five years. Compare this to the 443 other companies in this industry with analyst coverage, which are forecast to grow their revenue at 13% per year. So it's pretty clear that, while AppFolio'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 downgraded their earnings per share estimates, showing that there has been a clear decline in sentiment following these results. Happily, there were no real changes to sales forecasts, with the business still expected to grow in line with the overall industry. The consensus price target fell measurably, with the analysts seemingly not reassured by the latest results, leading to a lower estimate of AppFolio's future valuation.
Keeping that in mind, we still think that the longer term trajectory of the business is much more important for investors to consider. At Simply Wall St, we have a full range of analyst estimates for AppFolio going out to 2023, and you can see them free on our platform here..
You still need to take note of risks, for example - AppFolio has 4 warning signs (and 2 which are concerning) we think 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.
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