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Limeade, Inc. (ASX:LME) Analysts Just Cut Their EPS Forecasts Substantially

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·3 min read
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Market forces rained on the parade of Limeade, Inc. (ASX:LME) shareholders today, when the analysts downgraded their forecasts for this year. Both revenue and earnings per share (EPS) estimates were cut sharply as the analysts factored in the latest outlook for the business, concluding that they were too optimistic previously.

Following the latest downgrade, the two analysts covering Limeade provided consensus estimates of US$51m revenue in 2021, which would reflect an uneasy 9.8% decline on its sales over the past 12 months. Per-share losses are expected to explode, reaching US$0.036 per share. However, before this estimates update, the consensus had been expecting revenues of US$59m and US$0.016 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.

View our latest analysis for Limeade

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The consensus price target fell 8.0% to AU$1.87, with the analysts clearly concerned about the company following the weaker revenue and earnings outlook. 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. The most optimistic Limeade analyst has a price target of AU$2.00 per share, while the most pessimistic values it at AU$1.73. This is a very narrow spread of estimates, implying either that Limeade is an easy company to value, or - more likely - the analysts are relying heavily on some key assumptions.

Another way we can view these estimates is in the context of the bigger picture, such as how the forecasts stack up against past performance, and whether forecasts are more or less bullish relative to other companies in the industry. These estimates imply that sales are expected to slow, with a forecast annualised revenue decline of 9.8% by the end of 2021. This indicates a significant reduction from annual growth of 16% over the last three years. Compare this with our data, which suggests that other companies in the same industry are, in aggregate, expected to see their revenue grow 18% per year. So although its revenues are forecast to shrink, this cloud does not come with a silver lining - Limeade is expected to lag 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 Limeade. Regrettably, they also downgraded their revenue estimates, and the latest forecasts imply the business will grow sales slower than the wider market. After such a stark change in sentiment from analysts, we'd understand if readers now felt a bit wary of Limeade.

With that said, the long-term trajectory of the company's earnings is a lot more important than next year. At least one analyst has provided forecasts out to 2023, which can be seen for free on our platform here.

Another way to search for interesting companies that could be reaching an inflection point is to track whether management are buying or selling, with our free list of growing companies that insiders are buying.

This article by Simply Wall St is general in nature. 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.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.