One thing we could say about the analysts on Lightspeed POS Inc. (TSE:LSPD) - they aren't optimistic, having just made a major negative revision to their near-term (statutory) forecasts for the organization. Both revenue and earnings per share (EPS) forecasts went under the knife, suggesting the analysts have soured majorly on the business. Investors however, have been notably more optimistic about Lightspeed POS recently, with the stock price up a remarkable 28% to US$17.52 in the past week. It will be interesting to see if the downgrade has an impact on buying demand for the company's shares.
Following the downgrade, the most recent consensus for Lightspeed POS from its eleven analysts is for revenues of US$158m in 2021 which, if met, would be a major 49% increase on its sales over the past 12 months. The loss per share is anticipated to greatly reduce in the near future, narrowing 67% to US$0.58. However, before this estimates update, the consensus had been expecting revenues of US$178m and US$0.45 per share in losses. 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.
The consensus price target fell 22% to US$22.87, implicitly signalling that lower earnings per share are a leading indicator for Lightspeed POS' 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. There are some variant perceptions on Lightspeed POS, with the most bullish analyst valuing it at US$39.67 and the most bearish at US$11.00 per share. So we wouldn't be assigning too much credibility to analyst price targets in this case, because there are clearly some widely differing views on what kind of performance this business can generate. 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.
Looking at the bigger picture now, one of the ways we can make sense of these forecasts is to see how they measure up against both past performance and industry growth estimates. It's clear from the latest estimates that Lightspeed POS' rate of growth is expected to accelerate meaningfully, with the forecast 49% revenue growth noticeably faster than its historical growth of 29% p.a. over the past three years. Compare this with other companies in the same industry, which are forecast to grow their revenue 15% next year. Factoring in the forecast acceleration in revenue, it's pretty clear that Lightspeed POS is expected to grow much faster than its industry.
The Bottom Line
The most important thing to take away is that analysts increased their loss per share estimates for next year. 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 Lightspeed POS.
That said, the analysts might have good reason to be negative on Lightspeed POS, given major dilution from new stock issuance in the past year. For more information, you can click here to discover this and the 3 other flags 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.
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