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It's shaping up to be a tough period for 1&1 AG (ETR:1U1), which a week ago released some disappointing first-quarter results that could have a notable impact on how the market views the stock. Results look to have been somewhat negative - revenue fell 2.6% short of analyst estimates at €1.0b, and statutory earnings of €0.47 per share missed forecasts by 7.1%. 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. So we gathered the latest post-earnings forecasts to see what estimates suggest is in store for next year.
Check out our latest analysis for 1&1
Taking into account the latest results, the most recent consensus for 1&1 from 13 analysts is for revenues of €4.20b in 2024. If met, it would imply a satisfactory 2.6% increase on its revenue over the past 12 months. Statutory earnings per share are predicted to increase 5.8% to €1.82. In the lead-up to this report, the analysts had been modelling revenues of €4.20b and earnings per share (EPS) of €1.81 in 2024. So it's pretty clear that, although the analysts have updated their estimates, there's been no major change in expectations for the business following the latest results.
The analysts reconfirmed their price target of €20.89, showing that the business is executing well and in line with expectations. 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. The most optimistic 1&1 analyst has a price target of €32.00 per share, while the most pessimistic values it at €10.20. So we wouldn't be assigning too much credibility to analyst price targets in this case, because there are clearly some widely different views on what kind of performance this business can generate. As a result it might not be a great idea to make decisions based on the consensus price target, which is after all just an average of this wide range of estimates.
Taking a look at the bigger picture now, one of the ways we can understand these forecasts is to see how they compare to both past performance and industry growth estimates. It's clear from the latest estimates that 1&1's rate of growth is expected to accelerate meaningfully, with the forecast 3.4% annualised revenue growth to the end of 2024 noticeably faster than its historical growth of 2.5% p.a. over the past five years. Compare this with other companies in the same industry, which are forecast to grow their revenue 0.8% annually. Factoring in the forecast acceleration in revenue, it's pretty clear that 1&1 is expected to grow much faster than its industry.