Investors in Adverum Biotechnologies, Inc. (NASDAQ:ADVM) had a good week, as its shares rose 3.2% to close at US$10.33 following the release of its annual results. Revenues fell badly short of expectations, with sales of US$250k being some 40% below what analysts had forecast. Statutory losses were in line with forecasts, with Adverum Biotechnologies losing US$1.01 a share. Following the result, 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 analysts' latest (statutory) post-earnings forecasts for next year.
Following the latest results, Adverum Biotechnologies's five analysts are now forecasting revenues of US$568.0k in 2020. This would be a huge 127% improvement in sales compared to the last 12 months. The loss per share is expected to ameliorate slightly, reducing to US$1.08 on a statutory basis. Yet prior to the latest earnings, analysts had been forecasting revenues of US$800.0k and losses of US$1.14 per share in 2020. There's been a definite change in sentiment after these results, with analysts administering a to next year's revenue estimates, while at the same time substantially upgrading EPS. It's almost as though the business is forecast to reduce its focus on growth to enhance profitability.
The consensus price target was broadly unchanged at US$18.80, implying that the business is performing roughly in line with expectations, despite adjustments to both revenue and earnings estimates. 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 Adverum Biotechnologies at US$21.00 per share, while the most bearish prices it at US$13.00. This shows there is still quite a bit of diversity in estimates, but analysts don't appear to be totally split on the stock as though it might be a success or failure situation.
It can be useful to take a broader overview by seeing how analyst forecasts compare, both to the Adverum Biotechnologies's past performance and to peers in the same market. For example, we noticed that Adverum Biotechnologies's rate of growth is expected to accelerate meaningfully, with revenues forecast to grow at 127%, well above its historical decline of 5.9% a year over the past five years. Compare this against analyst estimates for the wider market, which suggest that (in aggregate) market revenues are expected to grow 16% next year. Although Adverum Biotechnologies's revenues are expected to improve, it seems that analysts are also expecting it to grow faster than the wider market.
The Bottom Line
The most important thing to note from these estimates is that the consensus increased its forecast losses next year, suggesting all may not be well at Adverum Biotechnologies. Regrettably, they also downgraded their revenue estimates, but the latest forecasts still imply the business will grow faster than the wider market. Still, earnings are more important to the long-term value of the business. The consensus price target held steady at US$18.80, with the latest estimates not enough to have an impact on analysts' estimated valuations.
Even so, the longer term trajectory of the business is much more important for the value creation of shareholders. At Simply Wall St, we have a full range of analyst estimates for Adverum Biotechnologies going out to 2024, and you can see them free on our platform here..
We also provide an overview of the Adverum Biotechnologies Board and CEO remuneration and length of tenure at the company, and whether insiders have been buying the stock, here.
If you spot an error that warrants correction, please contact the editor at email@example.com. This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. Simply Wall St has no position in the stocks mentioned.
We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Thank you for reading.