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Shareholders in Talos Energy Inc. (NYSE:TALO) may be thrilled to learn that the analysts have just delivered a major upgrade to their near-term forecasts. The analysts have sharply increased their revenue numbers, with a view that Talos Energy will make substantially more sales than they'd previously expected. The stock price has risen 6.1% to US$23.59 over the past week, suggesting investors are becoming more optimistic. It will be interesting to see if this latest upgrade is enough to kickstart further buying interest in the stock.
After this upgrade, Talos Energy's four analysts are now forecasting revenues of US$1.6b in 2022. This would be a meaningful 14% improvement in sales compared to the last 12 months. Prior to the latest estimates, the analysts were forecasting revenues of US$1.4b in 2022. The consensus has definitely become more optimistic, showing a nice gain to revenue forecasts.
See our latest analysis for Talos Energy
Additionally, the consensus price target for Talos Energy increased 5.3% to US$30.20, showing a clear increase in optimism from the analysts involved. 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. The most optimistic Talos Energy analyst has a price target of US$41.00 per share, while the most pessimistic values it at US$19.00. Note the wide gap in analyst price targets? This implies to us that there is a fairly broad range of possible scenarios for the underlying business.
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 Talos Energy's rate of growth is expected to accelerate meaningfully, with the forecast 20% annualised revenue growth to the end of 2022 noticeably faster than its historical growth of 8.9% p.a. over the past three years. Compare this with other companies in the same industry, which are forecast to see a revenue decline of 4.5% annually. It seems obvious that as part of the brighter growth outlook, Talos Energy is expected to grow faster than the wider industry.
The Bottom Line
The most important thing to take away from this upgrade is that analysts lifted their revenue estimates for this year. They're also forecasting for revenues to perform better than companies in the wider market. There was also an increase in the price target, suggesting that there is more optimism baked into the forecasts than there was previously. Given that analysts appear to be expecting substantial improvement in the sales pipeline, now could be the right time to take another look at Talos Energy.