News Flash: 3 Analysts Think Sezzle Inc. (ASX:SZL) Earnings Are Under Threat

The analysts covering Sezzle Inc. (ASX:SZL) delivered a dose of negativity to shareholders today, by making a substantial revision to their statutory forecasts for this year. Both revenue and earnings per share (EPS) estimates were cut sharply as analysts factored in the latest outlook for the business, concluding that they were too optimistic previously.

Following the downgrade, the most recent consensus for Sezzle from its three analysts is for revenues of US$159m in 2022 which, if met, would be a huge 38% increase on its sales over the past 12 months. Losses are forecast to hold steady at around US$0.37. However, before this estimates update, the consensus had been expecting revenues of US$177m and US$0.30 per share in losses. 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.

View our latest analysis for Sezzle

The consensus price target fell 23% to US$2.96, implicitly signalling that lower earnings per share are a leading indicator for Sezzle's valuation. 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 Sezzle, with the most bullish analyst valuing it at US$6.24 and the most bearish at US$2.00 per share. With such a wide range in price targets, the analysts are almost certainly betting on widely diverse outcomes for the underlying business. With this in mind, we wouldn't rely too heavily on the consensus price target, as it is just an average and analysts clearly have some deeply divergent views on the 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 pretty clear that there is an expectation that Sezzle's revenue growth will slow down substantially, with revenues to the end of 2022 expected to display 38% growth on an annualised basis. This is compared to a historical growth rate of 90% over the past three years. Juxtapose this against the other companies in the industry with analyst coverage, which are forecast to grow their revenues (in aggregate) 19% per year. Even after the forecast slowdown in growth, it seems obvious that Sezzle is also expected to grow faster than the wider industry.

The Bottom Line

The most important thing to take away is that analysts increased their loss per share estimates for this year. While analysts did downgrade their revenue estimates, these forecasts still imply revenues will perform better than the wider market. After such a stark change in sentiment from analysts, we'd understand if readers now felt a bit wary of Sezzle.

As you can see, the analysts clearly aren't bullish, and there might be good reason for that. We've identified some potential issues with Sezzle's financials, such as a short cash runway. For more information, you can click here to discover this and the 3 other flags we've identified.

Another way to search for interesting companies that could be reaching an inflection point is to track whether management are buying or selling, with our free list of growing companies 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.