The latest analyst coverage could presage a bad day for loanDepot, Inc. (NYSE:LDI), with the analysts making across-the-board cuts to their statutory estimates that might leave shareholders a little shell-shocked. 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 latest downgrade, the ten analysts covering loanDepot provided consensus estimates of US$1.8b revenue in 2022, which would reflect a concerning 45% decline on its sales over the past 12 months. 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 31% to US$3.56, with the analysts clearly concerned about the company following the weaker revenue and earnings outlook. 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. 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.
Looking at the bigger picture now, one of the ways we can make sense of these forecasts is to see how they measure up against both past performance and industry growth estimates. 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 55% decline in revenue until the end of 2022. By contrast, our data suggests that other companies (with analyst coverage) in a similar industry are forecast to see their revenue grow 3.7% per year. 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. Unfortunately analysts also downgraded their revenue estimates, and industry data suggests that loanDepot's revenues are expected to grow slower than the wider market. Given the scope of the downgrades, it would not be a surprise to see the market become more wary of the business.
With that said, the long-term trajectory of the company's earnings is a lot more important than next year. We have estimates - from multiple loanDepot 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.
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.