Time To Worry? Analysts Just Downgraded Their Blend Labs, Inc. (NYSE:BLND) Outlook

Market forces rained on the parade of Blend Labs, Inc. (NYSE:BLND) shareholders today, when the analysts downgraded their forecasts for this year. This report focused on revenue estimates, and it looks as though the consensus view of the business has become substantially more conservative.

Following the downgrade, the consensus from nine analysts covering Blend Labs is for revenues of US$166m in 2023, implying a painful 29% decline in sales compared to the last 12 months. Prior to the latest estimates, the analysts were forecasting revenues of US$212m in 2023. The consensus view seems to have become more pessimistic on Blend Labs, noting the pretty serious reduction to revenue estimates in this update.

See our latest analysis for Blend Labs

Notably, the analysts have cut their price target 23% to US$1.81, suggesting concerns around Blend Labs' valuation. 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. The most optimistic Blend Labs analyst has a price target of US$2.50 per share, while the most pessimistic values it at US$1.30. 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.

One way to get more context on these forecasts is to look at how they compare to both past performance, and how other companies in the same industry are performing. These estimates imply that sales are expected to slow, with a forecast annualised revenue decline of 29% by the end of 2023. This indicates a significant reduction from annual growth of 47% over the last three 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 - Blend Labs is expected to lag the wider industry.

The Bottom Line

The most important thing to take away is that analysts cut their revenue estimates for this year. They're also anticipating slower revenue growth than the wider market. Furthermore, there was a cut to the price target, suggesting that the latest news has led to more pessimism about the intrinsic value of the business. 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 Blend Labs after today.

That said, the analysts might have good reason to be negative on Blend Labs, given dilutive stock issuance over the past year. For more information, you can click here to discover this and the 2 other risks we've identified.

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.