Analysts Just Made A Major Revision To Their Home Point Capital Inc. (NASDAQ:HMPT) Revenue Forecasts

The analysts covering Home Point Capital Inc. (NASDAQ:HMPT) delivered a dose of negativity to shareholders today, by making a substantial revision to their statutory forecasts for this year. This report focused on revenue estimates, and it looks as though the consensus view of the business has become substantially more conservative. Surprisingly the share price has been buoyant, rising 12% to US$1.90 in the past 7 days. It will be interesting to see if the downgrade has an impact on buying demand for the company's shares.

Following the latest downgrade, the current consensus, from the eight analysts covering Home Point Capital, is for revenues of US$201m in 2023, which would reflect a sizeable 45% reduction in Home Point Capital's sales over the past 12 months. The loss per share is anticipated to greatly reduce in the near future, narrowing 81% to US$0.22. However, before this estimates update, the consensus had been expecting revenues of US$251m and US$0.37 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 reducing the estimated losses the business will incur.

View our latest analysis for Home Point Capital

The consensus price target was broadly unchanged at US$1.86, implying that the business is performing roughly in line with expectations, despite adjustments to both revenue and earnings estimates. 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. Currently, the most bullish analyst values Home Point Capital at US$2.50 per share, while the most bearish prices it at US$1.25. This is a fairly broad spread of estimates, suggesting that the analysts are forecasting a wide range of possible outcomes for the business.

These estimates are interesting, but it can be useful to paint some more broad strokes when seeing how forecasts compare, both to the Home Point Capital's past performance and to peers in the same industry. One more thing stood out to us about these estimates, and it's the idea that Home Point Capital's decline is expected to accelerate, with revenues forecast to fall at an annualised rate of 45% to the end of 2023. This tops off a historical decline of 12% a year over the past three years. Compare this against analyst estimates for companies in the broader industry, which suggest that revenues (in aggregate) are expected to grow 7.7% annually. So while a broad number of companies are forecast to grow, unfortunately Home Point Capital is expected to see its sales affected worse than other companies in the industry.

The Bottom Line

Regrettably, they also downgraded their revenue estimates, and the latest forecasts imply the business will grow sales slower than the wider market. Often, one downgrade can set off a daisy-chain of cuts, especially if an industry is in decline. So we wouldn't be surprised if the market became a lot more cautious on Home Point Capital after today.

Even so, the longer term trajectory of the business is much more important for the value creation of shareholders. We have estimates - from multiple Home Point Capital analysts - going out to 2024, and you can see them free on our platform here.

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.