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Market forces rained on the parade of loanDepot, Inc. (NYSE:LDI) shareholders today, when the analysts downgraded their forecasts for this year. Both revenue and earnings per share (EPS) forecasts went under the knife, suggesting the analysts have soured majorly on the business.
Following the latest downgrade, the current consensus, from the ten analysts covering loanDepot, is for revenues of US$2.5b in 2022, which would reflect a stressful 46% reduction in loanDepot's sales over the past 12 months. Statutory earnings per share are anticipated to nosedive 91% to US$0.59 in the same period. Before this latest update, the analysts had been forecasting revenues of US$3.0b and earnings per share (EPS) of US$1.22 in 2022. Indeed, we can see that the analysts are a lot more bearish about loanDepot's prospects, administering a substantial drop in revenue estimates and slashing their EPS estimates to boot.
It'll come as no surprise then, to learn that the analysts have cut their price target 20% to US$6.76. 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. The most optimistic loanDepot analyst has a price target of US$12.00 per share, while the most pessimistic values it at US$4.50. We would probably assign less value to the forecasts in this situation, because such a wide range of estimates could imply that the future of this business is difficult to value accurately. 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.
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. We would highlight that sales are expected to reverse, with a forecast 46% annualised revenue decline to the end of 2022. That is a notable change from historical growth of 52% over the last three years. Yet aggregate analyst estimates for other companies in the industry suggest that industry revenues are forecast to decline 1.6% per year. The forecasts do look bearish for loanDepot, since they're expecting it to shrink faster than the industry.
The Bottom Line
The biggest issue in the new estimates is that analysts have reduced their earnings per share estimates, suggesting business headwinds lay ahead for loanDepot. Unfortunately they also downgraded their revenue estimates, and our aggregation of analyst estimates suggests that loanDepot revenue is expected to perform worse than the wider market. With a serious cut to this year's expectations and a falling price target, we wouldn't be surprised if investors were becoming wary of loanDepot.
There might be good reason for analyst bearishness towards loanDepot, like concerns around earnings quality. Learn more, and discover the 2 other flags we've identified, for 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.