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The analysts covering Aadi Bioscience, Inc. (NASDAQ:AADI) delivered a dose of negativity to shareholders today, by making a substantial revision to their statutory forecasts for next year. There was a fairly draconian cut to their revenue estimates, perhaps an implicit admission that previous forecasts were much too optimistic.
Following the downgrade, the consensus from four analysts covering Aadi Bioscience is for revenues of US$3.4m in 2022, implying a stressful 76% decline in sales compared to the last 12 months. Losses are presumed to reduce, shrinking 17% from last year to US$3.45. Yet prior to the latest estimates, the analysts had been forecasting revenues of US$7.4m and losses of US$3.47 per share in 2022. So there's definitely been a change in sentiment in this update, with the analysts administering a substantial haircut to next year's revenue estimates, while at the same time holding losses per share steady.
There was no real change to the consensus price target of US$50.00, suggesting that the revisions to revenue estimates are not expected to have a long-term impact on Aadi Bioscience's valuation. 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. There are some variant perceptions on Aadi Bioscience, with the most bullish analyst valuing it at US$51.00 and the most bearish at US$49.00 per share. The narrow spread of estimates could suggest that the business' future is relatively easy to value, or that the analysts have a clear view on its prospects.
These estimates are interesting, but it can be useful to paint some more broad strokes when seeing how forecasts compare, both to the Aadi Bioscience's past performance and to peers in the same industry. These estimates imply that sales are expected to slow, with a forecast annualised revenue decline of 68% by the end of 2022. This indicates a significant reduction from annual growth of 29% over the last year. By contrast, our data suggests that other companies (with analyst coverage) in the same industry are forecast to see their revenue grow 15% annually for the foreseeable future. It's pretty clear that Aadi Bioscience's revenues are expected to perform substantially worse than the wider industry.
The Bottom Line
Unfortunately analysts also downgraded their revenue estimates, and industry data suggests that Aadi Bioscience's revenues are expected to grow slower than the wider market. Given the stark change in sentiment, we'd understand if investors became more cautious on Aadi Bioscience after today.
Even so, the longer term trajectory of the business is much more important for the value creation of shareholders. We have estimates - from multiple Aadi Bioscience analysts - going out to 2023, and you can see them free on our platform here.
Of course, seeing company management invest large sums of money in a stock can be just as useful as knowing whether analysts are downgrading their estimates. So you may also wish to search this free list of stocks that insiders are buying.
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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