Investors in Sweetgreen, Inc. (NYSE:SG) had a good week, as its shares rose 8.5% to close at US$19.81 following the release of its second-quarter results. It was a moderately negative result overall - revenue fell 4.1% short of analyst estimates at US$125m, and statutory losses were in line with analyst expectations, at US$0.36 per share. 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. We thought readers would find it interesting to see the analysts latest (statutory) post-earnings forecasts for next year.
Taking into account the latest results, the current consensus from Sweetgreen's nine analysts is for revenues of US$489.4m in 2022, which would reflect a notable 17% increase on its sales over the past 12 months. Losses are forecast to narrow 8.0% to US$1.55 per share. Before this earnings announcement, the analysts had been modelling revenues of US$529.8m and losses of US$1.48 per share in 2022. So it's pretty clear consensus is more negative on Sweetgreen after the new consensus numbers; while the analysts trimmed their revenue estimates, they also administered a moderate increase in per-share loss expectations.
The consensus price target fell 18% to US$21.13, with the analysts clearly concerned about the company following the weaker revenue and earnings outlook. 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. Currently, the most bullish analyst values Sweetgreen at US$30.00 per share, while the most bearish prices it at US$15.00. This is a fairly broad spread of estimates, suggesting that analysts are forecasting a wide range of possible outcomes for the business.
Looking at the bigger picture now, one of the ways we can make sense of these forecasts is to see how they measure up against both past performance and industry growth estimates. It's pretty clear that there is an expectation that Sweetgreen's revenue growth will slow down substantially, with revenues to the end of 2022 expected to display 36% growth on an annualised basis. This is compared to a historical growth rate of 60% over the past year. Juxtapose this against the other companies in the industry with analyst coverage, which are forecast to grow their revenues (in aggregate) 13% per year. So it's pretty clear that, while Sweetgreen's revenue growth is expected to slow, it's still expected to grow faster than the industry itself.
The Bottom Line
The most important thing to take away is that the analysts increased their loss per share estimates for next year. They also downgraded their revenue estimates, although industry data suggests that Sweetgreen's revenues are expected to grow faster than the wider industry. The consensus price target fell measurably, with the analysts seemingly not reassured by the latest results, leading to a lower estimate of Sweetgreen's future valuation.
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 Sweetgreen going out to 2024, and you can see them free on our platform here..
We don't want to rain on the parade too much, but we did also find 1 warning sign for Sweetgreen that you need to be mindful of.
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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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