Market forces rained on the parade of ChemoCentryx, Inc. (NASDAQ:CCXI) shareholders today, when the analysts downgraded their forecasts for this year. This report focused on revenue estimates, and it looks as though the consensus view of the business has become substantially more conservative.
After this downgrade, ChemoCentryx's six analysts are now forecasting revenues of US$37m in 2020. This would be a decent 9.4% improvement in sales compared to the last 12 months. Losses are supposed to balloon 27% to US$1.41 per share. However, before this estimates update, the consensus had been expecting revenues of US$41m and US$1.33 per share in losses. Ergo, there's been a clear change in sentiment, with the analysts administering a notable cut to this year's revenue estimates, while at the same time increasing their loss per share forecasts.
Analysts lifted their price target 27% to US$70.33, implicitly signalling that lower earnings per share are not expected to have a longer-term impact on the stock's value. That's not the only conclusion we can draw from this data however, as some investors also like to consider the spread in estimates when evaluating analyst price targets. The most optimistic ChemoCentryx analyst has a price target of US$102 per share, while the most pessimistic values it at US$54.00. Note the wide gap in analyst price targets? This implies to us that there is a fairly broad range of possible scenarios for the underlying business.
One way to get more context on these forecasts is to look at how they compare to both past performance, and how other companies in the same industry are performing. For example, we noticed that ChemoCentryx's rate of growth is expected to accelerate meaningfully, with revenues forecast to grow 9.4%, well above its historical decline of 5.7% a year over the past three years. Compare this against analyst estimates for the wider industry, which suggest that (in aggregate) industry revenues are expected to grow 24% next year. Although ChemoCentryx's revenues are expected to improve, it seems that the analysts are still bearish on the business, forecasting it to grow slower than the wider industry.
The Bottom Line
The most important thing to take away is that analysts increased their loss per share estimates for this year. Unfortunately analysts also downgraded their revenue estimates, and industry data suggests that ChemoCentryx's revenues are expected to grow slower than the wider market. There was also an increase in the price target, suggesting that there is more optimism baked into the forecasts than there was previously. Given the stark change in sentiment, we'd understand if investors became more cautious on ChemoCentryx after today.
With that said, the long-term trajectory of the company's earnings is a lot more important than next year. At Simply Wall St, we have a full range of analyst estimates for ChemoCentryx going out to 2024, 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.
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.
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