On Thursday, BofA Securities updated its financial outlook for Goosehead Insurance Inc. shares (NASDAQ:GSHD), raising the price target to $36 from the previous $35 while maintaining an Underperform rating on the stock. The revision follows a comprehensive review and streamlining of the revenue and earnings model used to evaluate the company's financial performance.
The analyst from BofA Securities highlighted the need to update the model due to various changes that have occurred over time, such as shifts in accounting standards and the consolidation of business segments. These changes have made parts of the previous model obsolete and overly reliant on assumptions. The focus has been particularly on the potential risks to the company's revenue projections for 2025.
Goosehead Insurance's revenue forecasts have been a point of concern, especially following the first quarter earnings report released on April 24, 2024, which failed to meet expectations. The Street consensus for the company's 2025 revenue has been adjusted downward to $382 million from the earlier $401 million. Moreover, there have been almost daily revisions to the consensus since the earnings miss.
The analyst indicated that while the consensus has significantly lowered its 2025 revenue projection from the beginning of 2024, which was $440 million, it still anticipates a 27-30% growth rate for 2025. This projection remains optimistic considering the reported revenue growth of 10-11% for the fourth quarter of 2023 and the first quarter of 2024.
BofA Securities forecasts a more conservative 16% revenue growth for Goosehead Insurance in 2025, estimating the revenue to be around $333 million. This forecast is notably lower than the current consensus, suggesting a cautious outlook on the company's growth trajectory.
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