What Does The Future Hold For LivePerson, Inc. (NASDAQ:LPSN)? These Analysts Have Been Cutting Their Estimates

The analysts covering LivePerson, Inc. (NASDAQ:LPSN) delivered a dose of negativity to shareholders today, by making a substantial revision to their statutory 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 the downgrade, the consensus from twelve analysts covering LivePerson is for revenues of US$434m in 2023, implying an uneasy 16% decline in sales compared to the last 12 months. Losses are predicted to fall substantially, shrinking 52% to US$1.43. Yet before this consensus update, the analysts had been forecasting revenues of US$550m and losses of US$1.37 per share in 2023. 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 LivePerson

The consensus price target fell 50% to US$6.67, implicitly signalling that lower earnings per share are a leading indicator for LivePerson's valuation. It could also be instructive to look at the range of analyst estimates, to evaluate how different the outlier opinions are from the mean. Currently, the most bullish analyst values LivePerson at US$11.00 per share, while the most bearish prices it at US$4.00. 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.

Of course, another way to look at these forecasts is to place them into context against the industry itself. We would highlight that sales are expected to reverse, with a forecast 16% annualised revenue decline to the end of 2023. That is a notable change from historical growth of 19% over the last five years. Compare this with our data, which suggests that other companies in the same industry are, in aggregate, expected to see their revenue grow 12% per year. So although its revenues are forecast to shrink, this cloud does not come with a silver lining - LivePerson is expected to lag the wider industry.

The Bottom Line

The most important thing to take away is that analysts increased their loss per share estimates for this year. Regrettably, they also downgraded their revenue estimates, and the latest forecasts imply the business will grow sales 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 LivePerson's future valuation. Overall, given the drastic downgrade to this year's forecasts, we'd be feeling a little more wary of LivePerson going forwards.

As you can see, the analysts clearly aren't bullish, and there might be good reason for that. We've identified some potential issues with LivePerson's financials, such as dilutive stock issuance over the past year. For more information, you can click here to discover this and the 2 other concerns 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.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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.