Earnings Release: Here's Why Analysts Cut Their CS Disco, Inc. (NYSE:LAW) Price Target To US$8.17

There's been a notable change in appetite for CS Disco, Inc. (NYSE:LAW) shares in the week since its first-quarter report, with the stock down 13% to US$6.80. It was a respectable set of results; while revenues of US$36m were in line with analyst predictions, statutory losses were 11% smaller than expected, with CS Disco losing US$0.17 per share. Following the result, the analysts have updated their earnings model, and it would be good to know whether they think there's been a strong change in the company's prospects, or if it's business as usual. With this in mind, we've gathered the latest statutory forecasts to see what the analysts are expecting for next year.

See our latest analysis for CS Disco

Taking into account the latest results, the most recent consensus for CS Disco from six analysts is for revenues of US$147.2m in 2024. If met, it would imply an okay 4.7% increase on its revenue over the past 12 months. Losses are forecast to balloon 35% to US$0.72 per share. Before this latest report, the consensus had been expecting revenues of US$149.2m and US$0.75 per share in losses. So there seems to have been a moderate uplift in analyst sentiment with the latest consensus release, given the upgrade to loss per share forecasts for this year.

Even with the lower forecast losses, the analysts lowered their valuations, with the average price target falling 7.5% to US$8.17. It looks likethe analysts have become less optimistic about the overall business. 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 CS Disco at US$11.00 per share, while the most bearish prices it at US$6.00. 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.

Of course, another way to look at these forecasts is to place them into context against the industry itself. It's pretty clear that there is an expectation that CS Disco's revenue growth will slow down substantially, with revenues to the end of 2024 expected to display 6.4% growth on an annualised basis. This is compared to a historical growth rate of 16% over the past three years. 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 CS Disco is also expected to grow slower than other industry participants.

The Bottom Line

The most important thing to take away is that the analysts reconfirmed their loss per share estimates for next year. On the plus side, there were no major changes to revenue estimates; although forecasts imply they will perform worse 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 forecasts for CS Disco going out to 2026, 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 CS Disco you should be aware of.

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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.