Yahoo Finance Varonis Systems, Inc. (NASDAQ:VRNS) Analysts Just Slashed Next Year's Revenue Estimates By 11%
Market forces rained on the parade of Varonis Systems, Inc. (NASDAQ:VRNS) shareholders today, when the analysts downgraded their forecasts for next year. There was a fairly draconian cut to their revenue estimates, perhaps an implicit admission that previous forecasts were much too optimistic.
Following the downgrade, the most recent consensus for Varonis Systems from its 18 analysts is for revenues of US$527m in 2023 which, if met, would be a solid 15% increase on its sales over the past 12 months. The loss per share is anticipated to greatly reduce in the near future, narrowing 37% to US$0.79. Yet prior to the latest estimates, the analysts had been forecasting revenues of US$591m and losses of US$0.77 per share in 2023. So there's been quite a change-up of views after the recent consensus updates, with the analysts making a serious cut to their revenue forecasts while also expecting losses per share to increase.
Check out our latest analysis for Varonis Systems
The consensus price target fell 31% to US$28.76, implicitly signalling that lower earnings per share are a leading indicator for Varonis Systems' valuation. 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 Varonis Systems analyst has a price target of US$63.00 per share, while the most pessimistic values it at US$20.00. So we wouldn't be assigning too much credibility to analyst price targets in this case, because there are clearly some widely differing views on what kind of performance this business can generate. As a result it might not be possible to derive much meaning from the consensus price target, which is after all just an average of this wide range of estimates.
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 can infer from the latest estimates that forecasts expect a continuation of Varonis Systems'historical trends, as the 12% annualised revenue growth to the end of 2023 is roughly in line with the 14% annual revenue growth over the past five years. Compare this with the broader industry, which analyst estimates (in aggregate) suggest will see revenues grow 13% annually. It's clear that while Varonis Systems' revenue growth is expected to continue on its current trajectory, it's only expected to grow in line with the industry itself.
The Bottom Line
The most important thing to take away is that analysts increased their loss per share estimates for next year. Lamentably, they also downgraded their sales forecasts, but the business is still expected to grow at roughly the same rate as the market itself. Furthermore, there was a cut to the price target, suggesting that the latest news has led to more pessimism about the intrinsic value of the business. Overall, given the drastic downgrade to next year's forecasts, we'd be feeling a little more wary of Varonis Systems going forwards.
Still, the long-term prospects of the business are much more relevant than next year's earnings. We have estimates - from multiple Varonis Systems analysts - going out to 2024, and you can see them free on our platform here.
Of course, seeing company management invest large sums of money in a stock can be just as useful as knowing whether analysts are downgrading their estimates. So you may also wish to search this free list of stocks that insiders are buying.
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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.
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