US$18.13: That's What Analysts Think LegalZoom.com, Inc. (NASDAQ:LZ) Is Worth After Its Latest Results

There's been a notable change in appetite for LegalZoom.com, Inc. (NASDAQ:LZ) shares in the week since its quarterly report, with the stock down 15% to US$11.95. Sales of US$154m came in 2.4% ahead of expectations, although statutory earnings didn't fare nearly so well, recording a loss of US$0.15, a 16% miss. This is an important time for investors, as they can track a company's performance in its report, look at what experts are forecasting for next year, and see if there has been any change to expectations for the business. We've gathered the most recent statutory forecasts to see whether the analysts have changed their earnings models, following these results.

View our latest analysis for LegalZoom.com

Taking into account the latest results, the current consensus from LegalZoom.com's nine analysts is for revenues of US$654.8m in 2022, which would reflect a decent 10% increase on its sales over the past 12 months. Losses are predicted to fall substantially, shrinking 56% to US$0.29. Before this latest report, the consensus had been expecting revenues of US$654.2m and US$0.28 per share in losses.

As a result, it's unexpected to see that the consensus price target fell 8.8% to US$18.13, with the analysts seemingly becoming more concerned about ongoing losses, despite making no major changes to their forecasts. 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 LegalZoom.com at US$31.00 per share, while the most bearish prices it at US$12.00. We would probably assign less value to the analyst 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 a great idea to make decisions based on 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. We would highlight that LegalZoom.com's revenue growth is expected to slow, with the forecast 14% annualised growth rate until the end of 2022 being well below the historical 19% growth over the last year. Juxtapose this against the other companies in the industry with analyst coverage, which are forecast to grow their revenues (in aggregate) 6.9% per year. So it's pretty clear that, while LegalZoom.com's revenue growth is expected to slow, it's still expected to grow faster than the industry itself.

The Bottom Line

The most important thing to take away is that the analysts reconfirmed their loss per share estimates for next year. Happily, there were no major changes to revenue forecasts, with the business still expected to grow faster than the wider industry. The consensus price target fell measurably, with the analysts seemingly not reassured by the latest results, leading to a lower estimate of LegalZoom.com's future valuation.

Following on from that line of thought, we think that the long-term prospects of the business are much more relevant than next year's earnings. We have forecasts for LegalZoom.com going out to 2024, and you can see them free on our platform here.

And what about risks? Every company has them, and we've spotted 3 warning signs for LegalZoom.com you should know about.

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.