InterDigital, Inc. Just Beat Earnings Expectations: Here's What Analysts Think Will Happen Next
InterDigital, Inc. (NASDAQ:IDCC) investors will be delighted, with the company turning in some strong numbers with its latest results. The company beat both earnings and revenue forecasts, with revenue of US$87m, some 2.3% above estimates, and statutory earnings per share (EPS) coming in at US$0.76, 394% ahead of expectations. 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.
View our latest analysis for InterDigital
Taking into account the latest results, the current consensus, from the five analysts covering InterDigital, is for revenues of US$358.2m in 2021, which would reflect a perceptible 3.3% reduction in InterDigital’s sales over the past 12 months. Per-share earnings are expected to grow 11% to US$2.15. Before this earnings report, the analysts had been forecasting revenues of US$352.2m and earnings per share (EPS) of US$1.73 in 2021. Although the revenue estimates have not really changed, we can see there’s been a sizeable expansion in earnings per share expectations, suggesting that the analysts have become more bullish after the latest result.
The consensus price target rose 8.3% to US$96.20, suggesting that higher earnings estimates flow through to the stock’s valuation as well. Fixating on a single price target can be unwise though, since the consensus target is effectively the average of analyst price targets. As a result, some investors like to look at the range of estimates to see if there are any diverging opinions on the company’s valuation. There are some variant perceptions on InterDigital, with the most bullish analyst valuing it at US$104 and the most bearish at US$87.00 per share. This is a very narrow spread of estimates, implying either that InterDigital is an easy company to value, or – more likely – the analysts are relying heavily on some key assumptions.
Of course, another way to look at these forecasts is to place them into context against the industry itself. One thing that stands out from these estimates is that shrinking revenues are expected to moderate from the historical decline of 10% per annum over the past five years.
The Bottom Line
The biggest takeaway for us is the consensus earnings per share upgrade, which suggests a clear improvement in sentiment around InterDigital’s earnings potential next year. Fortunately, the analysts also reconfirmed their revenue estimates, suggesting sales are tracking in line with expectations – although our data does suggest that InterDigital’s revenues are expected to perform worse than the wider industry. 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 InterDigital. Long-term earnings power is much more important than next year’s profits. At Simply Wall St, we have a full range of analyst estimates for InterDigital going out to 2022, and you can see them free on our platform here..
You should always think about risks though. Case in point, we’ve spotted 2 warning signs for InterDigital you should be aware of, and 1 of them doesn’t sit too well with us.
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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