The analysts covering Offerpad Solutions Inc. (NYSE:OPAD) delivered a dose of negativity to shareholders today, by making a substantial revision to their statutory forecasts for this year. Both revenue and earnings per share (EPS) forecasts went under the knife, suggesting analysts have soured majorly on the business.
After this downgrade, Offerpad Solutions' nine analysts are now forecasting revenues of US$4.2b in 2022. This would be a solid 8.3% improvement in sales compared to the last 12 months. Following this this downgrade, earnings are now expected to tip over into loss-making territory, with the analysts forecasting losses of US$0.024 per share in 2022. Prior to this update, the analysts had been forecasting revenues of US$5.1b and earnings per share (EPS) of US$0.24 in 2022. There looks to have been a major change in sentiment regarding Offerpad Solutions' prospects, with a measurable cut to revenues and the analysts now forecasting a loss instead of a profit.
The consensus price target fell 30% to US$4.42, with the analysts clearly concerned about the company following the weaker revenue and earnings outlook. 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 Offerpad Solutions analyst has a price target of US$7.00 per share, while the most pessimistic values it at US$2.25. 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. With this in mind, we wouldn't rely too heavily on the consensus price target, as it is just an average and analysts clearly have some deeply divergent views on the business.
These estimates are interesting, but it can be useful to paint some more broad strokes when seeing how forecasts compare, both to the Offerpad Solutions' past performance and to peers in the same industry. It's pretty clear that there is an expectation that Offerpad Solutions' revenue growth will slow down substantially, with revenues to the end of 2022 expected to display 17% growth on an annualised basis. This is compared to a historical growth rate of 260% over the past year. By way of comparison, the other companies in this industry with analyst coverage are forecast to grow their revenue at 7.1% annually. So it's pretty clear that, while Offerpad Solutions' revenue growth is expected to slow, it's still expected to grow faster than the industry itself.
The Bottom Line
The biggest low-light for us was that the forecasts for Offerpad Solutions dropped from profits to a loss this year. While analysts did downgrade their revenue estimates, these forecasts still imply revenues will perform better than the wider market. Given the scope of the downgrades, it would not be a surprise to see the market become more wary of the business.
After a downgrade like this, it's pretty clear that previous forecasts were too optimistic. What's more, we've spotted several possible issues with Offerpad Solutions' business, like concerns around earnings quality. For more information, you can click here to discover this and the 1 other warning sign 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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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.
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