Latch, Inc. (NASDAQ:LTCH) Just Reported And Analysts Have Been Cutting Their Estimates
One of the biggest stories of last week was how Latch, Inc. (NASDAQ:LTCH) shares plunged 29% in the week since its latest full-year results, closing yesterday at US$3.81. Sales of US$41m came in 2.7% ahead of expectations, although statutory earnings didn't fare nearly so well, recording a loss of US$1.92, a 18% miss. 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.
Check out our latest analysis for Latch
Taking into account the latest results, the consensus forecast from Latch's eleven analysts is for revenues of US$108.7m in 2022, which would reflect a huge 163% improvement in sales compared to the last 12 months. Per-share losses are expected to explode, reaching US$1.64 per share. Before this latest report, the consensus had been expecting revenues of US$148.1m and US$1.17 per share in losses. So there's been quite a change-up of views after the recent consensus updates, withthe analysts making a serious cut to their revenue outlook while also expecting losses per share to increase.
The average price target fell 25% to US$7.67, implicitly signalling that lower earnings per share are a leading indicator for Latch's 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. Currently, the most bullish analyst values Latch at US$15.00 per share, while the most bearish prices it at US$4.00. With such a wide range in price targets, analysts are almost certainly betting on widely divergent outcomes in the underlying business. As a result it might not be a great idea to make decisions based on the consensus price target, which is after all just an average of this wide range of estimates.
Of course, another way to look at these forecasts is to place them into context against the industry itself. The analysts are definitely expecting Latch's growth to accelerate, with the forecast 163% annualised growth to the end of 2022 ranking favourably alongside historical growth of 129% per annum over the past year. Compare this with other companies in the same industry, which are forecast to grow their revenue 14% annually. Factoring in the forecast acceleration in revenue, it's pretty clear that Latch is expected to grow much faster than its industry.
The Bottom Line
The most important thing to note is the forecast of increased losses next year, suggesting all may not be well at Latch. Regrettably, they also downgraded their revenue estimates, but the latest forecasts still imply the business will grow faster 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. At Simply Wall St, we have a full range of analyst estimates for Latch going out to 2024, and you can see them free on our platform here..
And what about risks? Every company has them, and we've spotted 3 warning signs for Latch (of which 1 is significant!) you should know about.
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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.
