Revenue Miss: Socionext Inc. Fell 20% Short Of Analyst Revenue Estimates And Analysts Have Been Revising Their Models

One of the biggest stories of last week was how Socionext Inc. (TSE:6526) shares plunged 20% in the week since its latest first-quarter results, closing yesterday at JP¥1,913. Revenues were JP¥39b, 20% shy of what the analysts were expecting, although statutory earnings of JP¥49.74 per share were roughly in line with what was forecast. 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.

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Following the latest results, Socionext's five analysts are now forecasting revenues of JP¥233.2b in 2027. This would be a meaningful 14% improvement in revenue compared to the last 12 months. Statutory earnings per share are predicted to soar 67% to JP¥73.32. Before this earnings report, the analysts had been forecasting revenues of JP¥231.2b and earnings per share (EPS) of JP¥77.03 in 2027. The analysts seem to have become a little more negative on the business after the latest results, given the small dip in their earnings per share numbers for next year.

See our latest analysis for Socionext

The consensus price target held steady at JP¥2,400, with the analysts seemingly voting that their lower forecast earnings are not expected to lead to a lower stock price in the foreseeable future. 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 Socionext, with the most bullish analyst valuing it at JP¥3,200 and the most bearish at JP¥2,000 per share. This shows there is still a bit of diversity in estimates, but analysts don't appear to be totally split on the stock as though it might be a success or failure situation.

Another way we can view these estimates is in the context of the bigger picture, such as how the forecasts stack up against past performance, and whether forecasts are more or less bullish relative to other companies in the industry. For example, we noticed that Socionext's rate of growth is expected to accelerate meaningfully, with revenues forecast to exhibit 18% growth to the end of 2027 on an annualised basis. That is well above its historical decline of 6.2% a year over the past three years. Compare this against analyst estimates for the broader industry, which suggest that (in aggregate) industry revenues are expected to grow 18% annually. So it looks like Socionext is expected to grow at about the same rate as the wider 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. They also reconfirmed their revenue estimates, with the company predicted to grow at about the same rate as the wider industry. There was no real change to the consensus price target, suggesting that the intrinsic value of the business has not undergone any major changes with the latest estimates.

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. We have forecasts for Socionext going out to 2029, and you can see them free on our platform here.

We don't want to rain on the parade too much, but we did also find 4 warning signs for Socionext (3 are a bit unpleasant!) that you need to be mindful 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.