Bearish: Analysts Just Cut Their Offerpad Solutions Inc. (NYSE:OPAD) Revenue and EPS estimates

The analysts covering Offerpad Solutions Inc. (NYSE:OPAD) 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. The stock price has risen 7.9% to US$0.78 over the past week. 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 nine analysts covering Offerpad Solutions is for revenues of US$3.3b in 2023, implying a stressful 21% decline in sales compared to the last 12 months. Per-share losses are expected to explode, reaching US$0.20 per share. Yet prior to the latest estimates, the analysts had been forecasting revenues of US$4.3b and losses of US$0.052 per share in 2023. Ergo, there's been a clear change in sentiment, with the analysts administering a notable cut to next year's revenue estimates, while at the same time increasing their loss per share forecasts.

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The consensus price target fell 47% to US$1.71, 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. There are some variant perceptions on Offerpad Solutions, with the most bullish analyst valuing it at US$3.00 and the most bearish at US$0.80 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 Offerpad Solutions' past performance and to peers in the same industry. These estimates imply that sales are expected to slow, with a forecast annualised revenue decline of 17% by the end of 2023. This indicates a significant reduction from annual growth of 60% over the last three years. By contrast, our data suggests that other companies (with analyst coverage) in the same industry are forecast to see their revenue grow 2.5% annually for the foreseeable future. It's pretty clear that Offerpad Solutions' revenues are expected to perform substantially worse than the wider industry.

The Bottom Line

The most important thing to note from this downgrade is that the consensus increased its forecast losses next year, suggesting all may not be well at Offerpad Solutions. Unfortunately analysts also downgraded their revenue estimates, and industry data suggests that Offerpad Solutions' 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 Offerpad Solutions.

So things certainly aren't looking great, and you should also know that we've spotted some potential warning signs with Offerpad Solutions, including dilutive stock issuance over the past year. For more information, you can click here to discover this and the 3 other risks we've identified.

Of course, seeing company management invest large sums of money in a stock can be just as useful as knowing whether analysts are downgrading their estimates. So you may also wish to search this free list of stocks 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.