Earnings Miss: Solo Brands, Inc. Missed EPS And Analysts Are Revising Their Forecasts

Solo Brands, Inc. (NYSE:DTC) shareholders are probably feeling a little disappointed, since its shares fell 4.9% to US$2.34 in the week after its latest yearly results. Things were not great overall, with a surprise (statutory) loss of US$1.84 per share on revenues of US$495m, even though the analysts had been expecting a profit. Earnings are an important time for investors, as they can track a company's performance, look at what the analysts are forecasting for next year, and see if there's been a change in sentiment towards the company. We've gathered the most recent statutory forecasts to see whether the analysts have changed their earnings models, following these results.

See our latest analysis for Solo Brands

Following last week's earnings report, Solo Brands' eight analysts are forecasting 2024 revenues to be US$495.3m, approximately in line with the last 12 months. Earnings are expected to improve, with Solo Brands forecast to report a statutory profit of US$0.03 per share. In the lead-up to this report, the analysts had been modelling revenues of US$503.2m and earnings per share (EPS) of US$0.16 in 2024. The analysts seem to have become more bearish following the latest results. While there were no changes to revenue forecasts, there was a large cut to EPS estimates.

The average price target fell 21% to US$3.82, with reduced earnings forecasts clearly tied to a lower valuation estimate. 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 Solo Brands analyst has a price target of US$8.00 per share, while the most pessimistic values it at US$2.20. So we wouldn't be assigning too much credibility to analyst price targets in this case, because there are clearly some widely different views on what kind of performance this business can generate. With this in mind, we wouldn't rely too heavily 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 Solo Brands' revenue growth will slow down substantially, with revenues to the end of 2024 expected to display 0.1% growth on an annualised basis. This is compared to a historical growth rate of 32% over the past three years. Compare this against other companies (with analyst forecasts) in the industry, which are in aggregate expected to see revenue growth of 2.4% annually. Factoring in the forecast slowdown in growth, it seems obvious that Solo Brands is also expected to grow slower than other industry participants.

The Bottom Line

The biggest concern is that the analysts reduced their earnings per share estimates, suggesting business headwinds could lay ahead for Solo Brands. On the plus side, there were no major changes to revenue estimates; although forecasts imply they will perform worse 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 Solo Brands' future valuation.

With that in mind, we wouldn't be too quick to come to a conclusion on Solo Brands. Long-term earnings power is much more important than next year's profits. At Simply Wall St, we have a full range of analyst estimates for Solo Brands going out to 2026, and you can see them free on our platform here..

Before you take the next step you should know about the 1 warning sign for Solo Brands that we have uncovered.

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.