Results: JOANN Inc. Delivered A Surprise Loss And Now Analysts Have New Forecasts

Last week, you might have seen that JOANN Inc. (NASDAQ:JOAN) released its first-quarter result to the market. The early response was not positive, with shares down 5.3% to US$7.66 in the past week. It was a pretty negative result overall, with revenues of US$498m missing analyst predictions by 3.7%. Worse, the business reported a statutory loss of US$0.86 per share, a substantial decline on analyst expectations of 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. With this in mind, we've gathered the latest statutory forecasts to see what the analysts are expecting for next year.

Check out our latest analysis for JOANN

Taking into account the latest results, the current consensus, from the seven analysts covering JOANN, is for revenues of US$2.23b in 2023, which would reflect a noticeable 4.9% reduction in JOANN's sales over the past 12 months. Earnings are expected to tip over into lossmaking territory, with the analysts forecasting statutory losses of -US$0.56 per share in 2023. In the lead-up to this report, the analysts had been modelling revenues of US$2.36b and earnings per share (EPS) of US$1.12 in 2023. The analysts have made an abrupt about-face on JOANN, administering a minor downgrade to to revenue forecasts and slashing the earnings outlook from a profit to loss.

The average price target fell 43% to US$7.00, implicitly signalling that lower earnings per share are a leading indicator for JOANN's valuation. 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 JOANN at US$10.00 per share, while the most bearish prices it at US$5.00. 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.

Looking at the bigger picture now, one of the ways we can make sense of these forecasts is to see how they measure up against both past performance and industry growth estimates. We would also point out that the forecast 6.5% annualised revenue decline to the end of 2023 is better than the historical trend, which saw revenues shrink 17% annually over the past year Compare this against analyst estimates for companies in the broader industry, which suggest that revenues (in aggregate) are expected to grow 6.5% annually. So it's pretty clear that, while it does have declining revenues, the analysts also expect JOANN to suffer worse than the wider industry.

The Bottom Line

The most important thing to take away is that the analysts are expecting JOANN to become unprofitable next year. On the negative side, they also downgraded their revenue estimates, and forecasts imply revenues will perform worse than the wider industry. Furthermore, the analysts also cut their price targets, suggesting that the latest news has led to greater pessimism about the intrinsic value of the business.

With that in mind, we wouldn't be too quick to come to a conclusion on JOANN. Long-term earnings power is much more important than next year's profits. We have estimates - from multiple JOANN analysts - going out to 2025, and you can see them free on our platform here.

Plus, you should also learn about the 6 warning signs we've spotted with JOANN (including 2 which are a bit unpleasant) .

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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.