Earnings Release: Here's Why Analysts Cut Their Shift Technologies, Inc. (NASDAQ:SFT) Price Target To US$12.33

Shift Technologies, Inc. (NASDAQ:SFT) shareholders are probably feeling a little disappointed, since its shares fell 3.6% to US$8.55 in the week after its latest full-year results. Revenues were in line with expectations, at US$196m, while statutory losses ballooned to US$3.12 per share. The analysts typically update their forecasts at each earnings report, and we can judge from their estimates whether their view of the company has changed or if there are any new concerns to be aware of. So we gathered the latest post-earnings forecasts to see what estimates suggest is in store for next year.

See our latest analysis for Shift Technologies

Taking into account the latest results, the most recent consensus for Shift Technologies from seven analysts is for revenues of US$444.6m in 2021 which, if met, would be a substantial 127% increase on its sales over the past 12 months. Losses are predicted to fall substantially, shrinking 46% to US$1.68. Before this latest report, the consensus had been expecting revenues of US$393.3m and US$1.40 per share in losses. Ergo, there's been a clear change in sentiment, with the analysts lifting this year's revenue estimates, while at the same time increasing their loss per share numbers to reflect the cost of achieving this growth.

It will come as no surprise that expanding losses caused the consensus price target to fall 12% to US$12.33with the analysts implicitly ranking ongoing losses as a greater concern than growing revenues. 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. Currently, the most bullish analyst values Shift Technologies at US$15.00 per share, while the most bearish prices it at US$7.00. 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.

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. It's clear from the latest estimates that Shift Technologies' rate of growth is expected to accelerate meaningfully, with the forecast 127% annualised revenue growth to the end of 2021 noticeably faster than its historical growth of 16% 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 11% per year. It seems obvious that, while the growth outlook is brighter than the recent past, the analysts also expect Shift Technologies to grow faster than the wider industry.

The Bottom Line

The most important thing to take away is that the analysts increased their loss per share estimates for next year. Happily, they also upgraded their revenue estimates, and are forecasting revenues to grow faster 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.

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 estimates - from multiple Shift Technologies analysts - going out to 2025, and you can see them free on our platform here.

You should always think about risks though. Case in point, we've spotted 2 warning signs for Shift Technologies you should be aware of, and 1 of them is potentially serious.

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