Time To Worry? Analysts Are Downgrading Their SmartRent, Inc. (NYSE:SMRT) Outlook

One thing we could say about the analysts on SmartRent, Inc. (NYSE:SMRT) - they aren't optimistic, having just made a major negative revision to their near-term (statutory) forecasts for the organization. Revenue and earnings per share (EPS) forecasts were both revised downwards, with analysts seeing grey clouds on the horizon.

Following the downgrade, the current consensus from SmartRent's eight analysts is for revenues of US$170m in 2022 which - if met - would reflect a decent 14% increase on its sales over the past 12 months. Losses are expected to be contained, narrowing 12% from last year to US$0.45. Yet prior to the latest estimates, the analysts had been forecasting revenues of US$241m and losses of US$0.38 per share in 2022. Ergo, there's been a clear change in sentiment, with the analysts administering a notable cut to this year's revenue estimates, while at the same time increasing their loss per share forecasts.

Check out our latest analysis for SmartRent

The consensus price target fell 16% to US$5.72, implicitly signalling that lower earnings per share are a leading indicator for SmartRent's valuation. 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. The most optimistic SmartRent analyst has a price target of US$8.00 per share, while the most pessimistic values it at US$4.50. This is a fairly broad spread of estimates, suggesting that the analysts are forecasting a wide range of possible outcomes for the business.

Of course, another way to look at these forecasts is to place them into context against the industry itself. We would highlight that SmartRent's revenue growth is expected to slow, with the forecast 29% annualised growth rate until the end of 2022 being well below the historical 111% growth over the last year. Juxtapose this against the other companies in the industry with analyst coverage, which are forecast to grow their revenues (in aggregate) 7.0% per year. Even after the forecast slowdown in growth, it seems obvious that SmartRent is also expected to grow faster than the wider industry.

The Bottom Line

The most important thing to note from this downgrade is that the consensus increased its forecast losses this year, suggesting all may not be well at SmartRent. Unfortunately, analysts also downgraded their revenue estimates, although our data indicates revenues are expected to perform better than the wider market. After such a stark change in sentiment from analysts, we'd understand if readers now felt a bit wary of SmartRent.

Even so, the longer term trajectory of the business is much more important for the value creation of shareholders. We have estimates - from multiple SmartRent analysts - going out to 2024, and you can see them free on our platform here.

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.

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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.