Latch, Inc. (NASDAQ:LTCH) Analysts Are Cutting Their Estimates: Here's What You Need To Know

There's been a major selloff in Latch, Inc. (NASDAQ:LTCH) shares in the week since it released its yearly report, with the stock down 29% to US$3.81. The results don't look great, especially considering that statutory losses grew 18% toUS$1.92 per share. Revenues of US$41,360,000 did beat expectations by 2.7%, but it looks like a bit of a cold comfort. 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.

Check out our latest analysis for Latch

Taking into account the latest results, the most recent consensus for Latch from eleven analysts is for revenues of US$108.7m in 2022 which, if met, would be a major 163% increase on its sales over the past 12 months. Per-share losses are expected to explode, reaching US$1.64 per share. Before this latest report, the consensus had been expecting revenues of US$148.1m and US$1.17 per share in losses. So there's been quite a change-up of views after the recent consensus updates, withthe analysts making a serious cut to their revenue outlook while also expecting losses per share to increase.

The average price target fell 25% to US$7.67, implicitly signalling that lower earnings per share are a leading indicator for Latch's valuation. The consensus price target is just an average of individual analyst targets, so - it could be handy to see how wide the range of underlying estimates is. Currently, the most bullish analyst values Latch at US$15.00 per share, while the most bearish prices it at US$4.00. So we wouldn't be assigning too much credibility to analyst price targets in this case, because there are clearly some widely different views on what kind of performance this business can generate. With this in mind, we wouldn't rely too heavily the consensus price target, as it is just an average and analysts clearly have some deeply divergent views on the business.

Of course, another way to look at these forecasts is to place them into context against the industry itself. It's clear from the latest estimates that Latch's rate of growth is expected to accelerate meaningfully, with the forecast 163% annualised revenue growth to the end of 2022 noticeably faster than its historical growth of 129% over the past year. Compare this with other companies in the same industry, which are forecast to grow their revenue 14% annually. Factoring in the forecast acceleration in revenue, it's pretty clear that Latch is expected to grow much faster than its industry.

The Bottom Line

The most important thing to take away is that the analysts increased their loss per share estimates for next year. Regrettably, they also downgraded their revenue estimates, but the latest forecasts still imply the business will 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.

Following on from that line of thought, we think that the long-term prospects of the business are much more relevant than next year's earnings. We have forecasts for Latch going out to 2024, and you can see them free on our platform here.

That said, it's still necessary to consider the ever-present spectre of investment risk. We've identified 3 warning signs with Latch (at least 1 which is a bit concerning) , and understanding these should be part of your investment process.

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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.