Today is shaping up negative for Home Point Capital Inc. (NASDAQ:HMPT) shareholders, with the analysts delivering a substantial negative revision to this year's forecasts. There was a fairly draconian cut to their revenue estimates, perhaps an implicit admission that previous forecasts were much too optimistic.
After the downgrade, the consensus from Home Point Capital's eight analysts is for revenues of US$381m in 2022, which would reflect a stressful 55% decline in sales compared to the last year of performance. After this downgrade, the company is anticipated to report a loss of US$0.77 in 2022, a sharp decline from a profit over the last year. However, before this estimates update, the consensus had been expecting revenues of US$491m and US$0.034 per share in losses. Ergo, there's been a clear change in sentiment, with the analysts administering a notable cut to this year's revenue estimates, while at the same time increasing their loss per share forecasts.
The consensus price target was broadly unchanged at US$3.81, perhaps implicitly signalling that the weaker earnings outlook is not expected to have a long-term impact on the valuation. It could also be instructive to look at the range of analyst estimates, to evaluate how different the outlier opinions are from the mean. The most optimistic Home Point Capital analyst has a price target of US$5.50 per share, while the most pessimistic values it at US$3.00. This is a fairly broad spread of estimates, suggesting that the analysts are forecasting a wide range of possible outcomes for 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 Home Point Capital's past performance and to peers in the same industry. Over the past year, revenues have declined around 47% annually. Worse, forecasts are essentially predicting the decline to accelerate, with the estimate for an annualised 79% decline in revenue until the end of 2022. Compare this against analyst estimates for companies in the broader industry, which suggest that revenues (in aggregate) are expected to grow 7.0% annually. So it's pretty clear that, while it does have declining revenues, the analysts also expect Home Point Capital to suffer worse than 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 Home Point Capital. Unfortunately analysts also downgraded their revenue estimates, and industry data suggests that Home Point Capital's revenues are expected to grow slower than the wider market. Overall, given the drastic downgrade to this year's forecasts, we'd be feeling a little more wary of Home Point Capital going forwards.
Still, the long-term prospects of the business are much more relevant than next year's earnings. At Simply Wall St, we have a full range of analyst estimates for Home Point Capital going out to 2024, and you can see them 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.
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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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