It's shaping up to be a tough period for Arhaus, Inc. (NASDAQ:ARHS), which a week ago released some disappointing quarterly results that could have a notable impact on how the market views the stock. Arhaus missed analyst forecasts, with revenues of US$319m and statutory earnings per share (EPS) of US$0.07, falling short by 3.0% and 9.1% respectively. 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 Arhaus after the latest results.
See our latest analysis for Arhaus
Following the latest results, Arhaus' twelve analysts are now forecasting revenues of US$1.32b in 2025. This would be an okay 4.5% improvement in revenue compared to the last 12 months. Statutory earnings per share are forecast to drop 16% to US$0.47 in the same period. Before this earnings report, the analysts had been forecasting revenues of US$1.36b and earnings per share (EPS) of US$0.56 in 2025. The analysts seem less optimistic after the recent results, reducing their revenue forecasts and making a real cut to earnings per share numbers.
The consensus price target fell 15% to US$11.67, with the weaker earnings outlook clearly leading valuation estimates. Fixating on a single price target can be unwise though, since the consensus target is effectively the average of analyst price targets. As a result, some investors like to look at the range of estimates to see if there are any diverging opinions on the company's valuation. Currently, the most bullish analyst values Arhaus at US$15.00 per share, while the most bearish prices it at US$8.50. As you can see, analysts are not all in agreement on the stock's future, but the range of estimates is still reasonably narrow, which could suggest that the outcome is not totally unpredictable.
Taking a look at the bigger picture now, one of the ways we can understand these forecasts is to see how they compare to both past performance and industry growth estimates. It's pretty clear that there is an expectation that Arhaus' revenue growth will slow down substantially, with revenues to the end of 2025 expected to display 3.6% growth on an annualised basis. This is compared to a historical growth rate of 22% over the past five years. By way of comparison, the other companies in this industry with analyst coverage are forecast to grow their revenue at 4.8% per year. So it's pretty clear that, while revenue growth is expected to slow down, the wider industry is also expected to grow faster than Arhaus.
The Bottom Line
The biggest concern is that the analysts reduced their earnings per share estimates, suggesting business headwinds could lay ahead for Arhaus. On the negative side, they also downgraded their revenue estimates, and forecasts imply they will perform worse than the wider industry. Furthermore, the analysts also cut their price targets, suggesting that the latest news has led to greater pessimism about the intrinsic value of the business.
Following on from that line of thought, we think that the long-term prospects of the business are much more relevant than next year's earnings. We have estimates - from multiple Arhaus analysts - going out to 2026, and you can see them free on our platform here.
You should always think about risks though. Case in point, we've spotted 2 warning signs for Arhaus you should be aware of, and 1 of them doesn't sit too well with us.
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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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