The ThredUp Inc. (NASDAQ:TDUP) Analysts Have Been Trimming Their Sales Forecasts

Market forces rained on the parade of ThredUp Inc. (NASDAQ:TDUP) shareholders today, when the analysts downgraded their forecasts for this year. There was a fairly draconian cut to their revenue estimates, perhaps an implicit admission that previous forecasts were much too optimistic.

Following this downgrade, ThredUp's twelve analysts are forecasting 2022 revenues to be US$285m, approximately in line with the last 12 months. Losses are expected to increase substantially, hitting US$0.90 per share. Yet prior to the latest estimates, the analysts had been forecasting revenues of US$318m and losses of US$0.82 per share in 2022. So there's been quite a change-up of views after the recent consensus updates, with the analysts making a serious cut to their revenue forecasts while also expecting losses per share to increase.

See our latest analysis for ThredUp

The consensus price target fell 25% to US$6.68, 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. Currently, the most bullish analyst values ThredUp at US$12.00 per share, while the most bearish prices it at US$3.50. With such a wide range in price targets, the analysts are almost certainly betting on widely diverse outcomes for the underlying business. 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.

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. It's pretty clear that there is an expectation that ThredUp's revenue growth will slow down substantially, with revenues to the end of 2022 expected to display 0.05% growth on an annualised basis. This is compared to a historical growth rate of 38% over the past year. By way of comparison, the other companies in this industry with analyst coverage are forecast to grow their revenue at 13% per year. Factoring in the forecast slowdown in growth, it seems obvious that ThredUp is also expected to grow slower than other industry participants.

The Bottom Line

The most important thing to take away is that analysts increased their loss per share estimates for this year. Unfortunately analysts also downgraded their revenue estimates, and industry data suggests that ThredUp's revenues are expected to grow slower than the wider market. The consensus price target fell measurably, with analysts seemingly not reassured by recent business developments, leading to a lower estimate of ThredUp's future valuation. Often, one downgrade can set off a daisy-chain of cuts, especially if an industry is in decline. So we wouldn't be surprised if the market became a lot more cautious on ThredUp after today.

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 ThredUp 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.