Analysts Have Lowered Expectations For Rover Group, Inc. (NASDAQ:ROVR) After Its Latest Results

It's been a mediocre week for Rover Group, Inc. (NASDAQ:ROVR) shareholders, with the stock dropping 12% to US$5.13 in the week since its latest annual results. Revenues of US$110m arrived in line with expectations, although statutory losses per share were US$0.72, an impressive 28% smaller than what broker models predicted. 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. With this in mind, we've gathered the latest statutory forecasts to see what the analysts are expecting for next year.

See our latest analysis for Rover Group

Taking into account the latest results, the consensus forecast from Rover Group's seven analysts is for revenues of US$174.1m in 2022, which would reflect a sizeable 58% improvement in sales compared to the last 12 months. Per-share statutory losses are expected to explode, reaching US$0.056 per share. Yet prior to the latest earnings, the analysts had been anticipated revenues of US$200.8m and earnings per share (EPS) of US$0.034 in 2022. So we can see that the consensus has become notably more bearish on Rover Group's outlook following these results, with a real cut to next year's revenue estimates. Furthermore, they expect the business to be loss-making next year, compared to their previous calls for a profit.

The consensus price target fell 38% to US$8.33, 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. The most optimistic Rover Group analyst has a price target of US$11.00 per share, while the most pessimistic values it at US$6.00. Note the wide gap in analyst price targets? This implies to us that there is a fairly broad range of possible scenarios for the underlying business.

These estimates are interesting, but it can be useful to paint some more broad strokes when seeing how forecasts compare, both to the Rover Group's past performance and to peers in the same industry. It's clear from the latest estimates that Rover Group's rate of growth is expected to accelerate meaningfully, with the forecast 58% annualised revenue growth to the end of 2022 noticeably faster than its historical growth of 3.4% p.a. over the past three years. By contrast, our data suggests that other companies (with analyst coverage) in a similar industry are forecast to grow their revenue at 7.3% per year. Factoring in the forecast acceleration in revenue, it's pretty clear that Rover Group is expected to grow much faster than its industry.

The Bottom Line

The biggest low-light for us was that the forecasts for Rover Group dropped from profits to a loss next year. They also downgraded their revenue estimates, although industry data suggests that Rover Group's revenues are 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 Rover Group's future valuation.

Keeping that in mind, we still think that the longer term trajectory of the business is much more important for investors to consider. We have forecasts for Rover Group going out to 2024, and you can see them free on our platform here.

We don't want to rain on the parade too much, but we did also find 1 warning sign for Rover Group that you need to be mindful of.

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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.