loanDepot, Inc. (NYSE:LDI) Analysts Just Slashed Next Year's Estimates

The analysts covering loanDepot, Inc. (NYSE:LDI) delivered a dose of negativity to shareholders today, by making a substantial revision to their statutory forecasts for next 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. Shares are up 6.5% to US$1.63 in the past week. It will be interesting to see if this downgrade motivates investors to start selling their holdings.

After the downgrade, the consensus from loanDepot's nine analysts is for revenues of US$1.1b in 2023, which would reflect a substantial 47% decline in sales compared to the last year of performance. The loss per share is anticipated to greatly reduce in the near future, narrowing 81% to US$0.22. Before this latest update, the analysts had been forecasting revenues of US$1.2b and earnings per share (EPS) of US$0.28 in 2023. There looks to have been a major change in sentiment regarding loanDepot's prospects, with a substantial drop in revenues and the analysts now forecasting a loss instead of a profit.

Check out the opportunities and risks within the US Mortgage industry.

There was no major change to the consensus price target of US$1.97, signalling that the business is performing roughly in line with expectations, despite lower earnings per share forecasts. There's another way to think about price targets though, and that's to look at the range of price targets put forward by analysts, because a wide range of estimates could suggest a diverse view on possible outcomes for the business. The most optimistic loanDepot analyst has a price target of US$3.25 per share, while the most pessimistic values it at US$1.00. 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. 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.

One way to get more context on these forecasts is to look at how they compare to both past performance, and how other companies in the same industry are performing. These estimates imply that sales are expected to slow, with a forecast annualised revenue decline of 40% by the end of 2023. This indicates a significant reduction from annual growth of 18% over the last five years. Compare this with our data, which suggests that other companies in the same industry are, in aggregate, expected to see their revenue grow 6.6% per year. It's pretty clear that loanDepot's revenues are expected to perform substantially worse than the wider industry.

The Bottom Line

The most important thing to take away is that analysts are expecting loanDepot to become unprofitable next 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. The lack of change in the price target is puzzling in light of the downgrade but, with a serious decline expected next year, we wouldn't be surprised if investors were a bit wary of loanDepot.

Even so, the longer term trajectory of the business is much more important for the value creation of shareholders. 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.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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.