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What Does The Future Hold For UWM Holdings Corporation (NYSE:UWMC)? These Analysts Have Been Cutting Their Estimates

Market forces rained on the parade of UWM Holdings Corporation (NYSE:UWMC) shareholders today, when the analysts downgraded their forecasts for this year. There was a fairly draconian cut to their revenue estimates, perhaps an implicit admission that previous forecasts were much too optimistic.

Following the downgrade, the latest consensus from UWM Holdings' seven analysts is for revenues of US$1.7b in 2023, which would reflect a solid 20% improvement in sales compared to the last 12 months. Statutory earnings per share are presumed to surge 215% to US$0.27. Prior to this update, the analysts had been forecasting revenues of US$2.0b and earnings per share (EPS) of US$0.28 in 2023. Indeed, we can see that analyst sentiment has declined measurably after the new consensus came out, with a measurable cut to revenue estimates and a minor downgrade to EPS estimates to boot.

Check out our latest analysis for UWM Holdings

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The average price target climbed 8.7% to US$4.68 despite the reduced earnings forecasts, suggesting that this earnings impact could be a positive for the stock, once it passes. There's another way to think about price targets though, and that's to look at the range of price targets put forward by analysts, because a wide range of estimates could suggest a diverse view on possible outcomes for the business. The most optimistic UWM Holdings analyst has a price target of US$6.50 per share, while the most pessimistic values it at US$3.50. This is a fairly broad spread of estimates, suggesting that the analysts are forecasting a wide range of possible outcomes for the business.

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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. For example, we noticed that UWM Holdings' rate of growth is expected to accelerate meaningfully, with revenues forecast to exhibit 27% growth to the end of 2023 on an annualised basis. That is well above its historical decline of 14% a year over the past three years. Compare this against analyst estimates for the broader industry, which suggest that (in aggregate) industry revenues are expected to grow 8.3% annually. So it looks like UWM Holdings is expected to grow faster than its competitors, at least for a while.

The Bottom Line

The most important thing to take away is that analysts cut their earnings per share estimates, expecting a clear decline in business conditions. While analysts did downgrade their revenue estimates, these forecasts still imply revenues will perform better than the wider market. There was also a nice increase in the price target, with analysts apparently feeling that the intrinsic value of the business is improving. Often, one downgrade can set off a daisy-chain of cuts, especially if an industry is in decline. So we wouldn't be surprised if the market became a lot more cautious on UWM Holdings after today.

There might be good reason for analyst bearishness towards UWM Holdings, like its declining profit margins. Learn more, and discover the 2 other warning signs 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.

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

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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