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The analysts covering Arcus Biosciences, Inc. (NYSE:RCUS) delivered a dose of negativity to shareholders today, by making a substantial revision to their statutory forecasts for this year. Both revenue and earnings per share (EPS) forecasts went under the knife, suggesting the analysts have soured majorly on the business.
Following the latest downgrade, the current consensus, from the nine analysts covering Arcus Biosciences, is for revenues of US$38m in 2021, which would reflect a concerning 55% reduction in Arcus Biosciences' sales over the past 12 months. Losses are supposed to balloon 54% to US$4.28 per share. Yet prior to the latest estimates, the analysts had been forecasting revenues of US$88m and losses of US$3.43 per share in 2021. So there's been quite a change-up of views after the recent consensus updates, with the analysts making a serious cut to their revenue forecasts while also expecting losses per share to increase.
There was no major change to the consensus price target of US$54.50, signalling that the business is performing roughly in line with expectations, despite lower earnings per share forecasts. 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 Arcus Biosciences analyst has a price target of US$70.00 per share, while the most pessimistic values it at US$40.00. This shows there is still some 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.
Of course, another way to look at these forecasts is to place them into context against the industry itself. We would highlight that sales are expected to reverse, with a forecast 80% annualised revenue decline to the end of 2021. That is a notable change from historical growth of 101% over the last three years. By contrast, our data suggests that other companies (with analyst coverage) in the same industry are forecast to see their revenue grow 10% annually for the foreseeable future. So although its revenues are forecast to shrink, this cloud does not come with a silver lining - Arcus Biosciences is expected to lag 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 Arcus Biosciences' revenues are expected to grow slower than the wider market. The lack of change in the price target is puzzling in light of the downgrade but, with a serious decline expected this year, we wouldn't be surprised if investors were a bit wary of Arcus Biosciences.
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 Arcus Biosciences 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. 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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