JOANN Inc. Just Missed Earnings; Here's What Analysts Are Forecasting Now
Shareholders might have noticed that JOANN Inc. (NASDAQ:JOAN) filed its quarterly result this time last week. The early response was not positive, with shares down 5.3% to US$7.66 in the past week. Revenues fell 3.7% short of expectations, at US$498m. Earnings correspondingly dipped, with JOANN reporting a statutory loss of US$0.86 per share, whereas the analysts had previously modelled a profit in this period. 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. Readers will be glad to know we've aggregated the latest statutory forecasts to see whether the analysts have changed their mind on JOANN after the latest results.
View our latest analysis for JOANN
After the latest results, the consensus from JOANN's seven analysts is for revenues of US$2.23b in 2023, which would reflect a small 4.9% decline in sales compared to the last year of performance. Earnings are expected to tip over into lossmaking territory, with the analysts forecasting statutory losses of -US$0.56 per share in 2023. Before this earnings report, the analysts had been forecasting revenues of US$2.36b and earnings per share (EPS) of US$1.12 in 2023. There looks to have been a significant drop in sentiment regarding JOANN's prospects after these latest results, with a minor downgrade to revenues and the analysts now forecasting a loss instead of a profit.
The average price target fell 43% to US$7.00, implicitly signalling that lower earnings per share are a leading indicator for JOANN's valuation. 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. There are some variant perceptions on JOANN, with the most bullish analyst valuing it at US$10.00 and the most bearish at US$5.00 per share. 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. One thing that stands out from these estimates is that shrinking revenues are expected to moderate over the period ending 2023 compared to the historical decline of 17% per annum over the past year. Compare this against analyst estimates for companies in the broader industry, which suggest that revenues (in aggregate) are expected to grow 6.5% annually. So while a broad number of companies are forecast to grow, unfortunately JOANN is expected to see its sales affected worse than other companies in the industry.
The Bottom Line
The biggest low-light for us was that the forecasts for JOANN dropped from profits to a loss next year. Unfortunately, they also downgraded their revenue estimates, and our data indicates revenues are expected to perform worse than the wider industry. Even so, earnings per share are more important to the intrinsic value of the business. The consensus price target fell measurably, with the analysts seemingly not reassured by the latest results, leading to a lower estimate of JOANN's future valuation.
With that in mind, we wouldn't be too quick to come to a conclusion on JOANN. Long-term earnings power is much more important than next year's profits. We have forecasts for JOANN going out to 2025, and you can see them free on our platform here.
You still need to take note of risks, for example - JOANN has 6 warning signs (and 2 which are a bit unpleasant) we think you should know about.
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.
