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Market forces rained on the parade of loanDepot, Inc. (NYSE:LDI) shareholders today, when the analysts downgraded their forecasts for this year. Both revenue and earnings per share (EPS) estimates were cut sharply as the analysts factored in the latest outlook for the business, concluding that they were too optimistic previously.
After the downgrade, the consensus from loanDepot's ten analysts is for revenues of US$1.8b in 2022, which would reflect a disturbing 44% decline in sales compared to the last year of performance. After this downgrade, the company is anticipated to report a loss of US$0.57 in 2022, a sharp decline from a profit over the last year. Before this latest update, the analysts had been forecasting revenues of US$2.4b and earnings per share (EPS) of US$0.54 in 2022. There looks to have been a major change in sentiment regarding loanDepot's prospects, with a sizeable cut to revenues and the analysts now forecasting a loss instead of a profit.
The consensus price target fell 28% to US$3.74, with the analysts clearly concerned about the company following the weaker revenue and earnings outlook. 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 loanDepot, with the most bullish analyst valuing it at US$7.00 and the most bearish at US$3.00 per share. We would probably assign less value to the forecasts in this situation, because such a wide range of estimates could imply that the future of this business is difficult to value accurately. 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.
Of course, another way to look at these forecasts is to place them into context against the industry itself. Over the past year, revenues have declined around 38% annually. Worse, forecasts are essentially predicting the decline to accelerate, with the estimate for an annualised 53% decline in revenue until the end of 2022. Compare this against analyst estimates for companies in the broader industry, which suggest that revenues (in aggregate) are expected to grow 3.7% annually. So while a broad number of companies are forecast to grow, unfortunately loanDepot is expected to see its sales affected worse than other companies in the industry.
The Bottom Line
The biggest low-light for us was that the forecasts for loanDepot dropped from profits to a loss this year. Regrettably, they also downgraded their revenue estimates, and the latest forecasts imply the business will grow sales slower than the wider market. With a serious cut to this year's expectations and a falling price target, we wouldn't be surprised if investors were becoming wary of loanDepot.
With that said, the long-term trajectory of the company's earnings is a lot more important than next year. At Simply Wall St, we have a full range of analyst estimates for loanDepot 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.