News Flash: 11 Analysts Think Open Lending Corporation (NASDAQ:LPRO) Earnings Are Under Threat

Market forces rained on the parade of Open Lending Corporation (NASDAQ:LPRO) shareholders today, when the analysts downgraded their forecasts for this year. Both revenue and earnings per share (EPS) estimates were cut sharply as the analysts factored in the latest outlook for the business, concluding that they were too optimistic previously. At US$10.91, shares are up 5.3% in the past 7 days. Investors could be forgiven for changing their mind on the business following the downgrade; but it's not clear if the revised forecasts will lead to selling activity.

Following the downgrade, the consensus from eleven analysts covering Open Lending is for revenues of US$196m in 2022, implying a discernible 7.9% decline in sales compared to the last 12 months. Statutory earnings per share are supposed to fall 19% to US$0.67 in the same period. Prior to this update, the analysts had been forecasting revenues of US$219m and earnings per share (EPS) of US$0.80 in 2022. It looks like analyst sentiment has declined substantially, with a measurable cut to revenue estimates and a real cut to earnings per share numbers as well.

Check out our latest analysis for Open Lending

The consensus price target fell 25% to US$17.70, with the weaker earnings outlook clearly leading analyst valuation estimates. 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. There are some variant perceptions on Open Lending, with the most bullish analyst valuing it at US$55.00 and the most bearish at US$8.00 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.

These estimates are interesting, but it can be useful to paint some more broad strokes when seeing how forecasts compare, both to the Open Lending's past performance and to peers in the same industry. We would highlight that sales are expected to reverse, with a forecast 15% annualised revenue decline to the end of 2022. That is a notable change from historical growth of 22% over the last year. By contrast, our data suggests that other companies (with analyst coverage) in the same industry are forecast to see their revenue grow 6.5% annually for the foreseeable future. So although its revenues are forecast to shrink, this cloud does not come with a silver lining - Open Lending is expected to lag the wider industry.

The Bottom Line

The most important thing to take away is that analysts cut their earnings per share estimates, expecting a clear decline in business conditions. Unfortunately analysts also downgraded their revenue estimates, and industry data suggests that Open Lending's revenues are expected to grow slower than the wider market. After such a stark change in sentiment from analysts, we'd understand if readers now felt a bit wary of Open Lending.

With that said, the long-term trajectory of the company's earnings is a lot more important than next year. At Simply Wall St, we have a full range of analyst estimates for Open Lending 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.

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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.