Earnings Release: Here's Why Analysts Cut Their Lulu's Fashion Lounge Holdings, Inc. (NASDAQ:LVLU) Price Target To US$3.55

Shareholders might have noticed that Lulu's Fashion Lounge Holdings, Inc. (NASDAQ:LVLU) filed its first-quarter result this time last week. The early response was not positive, with shares down 5.1% to US$2.41 in the past week. Revenues were in line with expectations, at US$91m, while statutory losses ballooned to US$0.14 per share. 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 thought readers would find it interesting to see the analysts latest (statutory) post-earnings forecasts for next year.

Check out our latest analysis for Lulu's Fashion Lounge Holdings

Taking into account the latest results, Lulu's Fashion Lounge Holdings' eight analysts currently expect revenues in 2023 to be US$411.1m, approximately in line with the last 12 months. In the lead-up to this report, the analysts had been modelling revenues of US$419.2m and earnings per share (EPS) of US$0.004 in 2023. While the analysts have made no real change to their revenue estimates, we can see that the consensus is now modelling a loss next year - a clear dip in sentiment compared to the previous outlook of a profit.

The consensus price target fell 5.2% to US$3.55per share, with the analysts clearly concerned by ballooning losses. 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 Lulu's Fashion Lounge Holdings, with the most bullish analyst valuing it at US$5.50 and the most bearish at US$2.15 per share. 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.

Another way we can view these estimates is in the context of the bigger picture, such as how the forecasts stack up against past performance, and whether forecasts are more or less bullish relative to other companies in the industry. We would highlight that sales are expected to reverse, with a forecast 2.4% annualised revenue decline to the end of 2023. That is a notable change from historical growth of 25% 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 6.3% annually for the foreseeable future. So although its revenues are forecast to shrink, this cloud does not come with a silver lining - Lulu's Fashion Lounge Holdings is expected to lag the wider industry.

The Bottom Line

The most important thing to take away is that the analysts are expecting Lulu's Fashion Lounge Holdings to become unprofitable next year. Fortunately, the analysts also reconfirmed their revenue estimates, suggesting sales are tracking in line with expectations - although our data does suggest that Lulu's Fashion Lounge Holdings' revenues are expected to 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 Lulu's Fashion Lounge Holdings' future valuation.

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

Before you take the next step you should know about the 5 warning signs for Lulu's Fashion Lounge Holdings (1 is potentially serious!) that we have uncovered.

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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.