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Analysts Just Shipped A Dazzling Upgrade To Their Arbutus Biopharma Corporation (NASDAQ:ABUS) Estimates

Arbutus Biopharma Corporation (NASDAQ:ABUS) shareholders will have a reason to smile today, with the analysts making substantial upgrades to this year's forecasts. The analysts greatly increased their revenue estimates, suggesting a stark improvement in business fundamentals. Investor sentiment seems to be improving too, with the share price up 7.0% to US$2.46 over the past 7 days. Could this big upgrade push the stock even higher?

Following the upgrade, the current consensus from Arbutus Biopharma's five analysts is for revenues of US$45m in 2022 which - if met - would reflect a sizeable 34% increase on its sales over the past 12 months. Losses are presumed to reduce, shrinking 11% from last year to US$0.45. Yet before this consensus update, the analysts had been forecasting revenues of US$32m and losses of US$0.52 per share in 2022. So there's been quite a change-up of views after the recent consensus updates, with the analysts making a sizeable increase to their revenue forecasts while also reducing the estimated loss as the business grows towards breakeven.

Check out our latest analysis for Arbutus Biopharma

earnings-and-revenue-growth
earnings-and-revenue-growth

Despite these upgrades, the analysts have not made any major changes to their price target of CA$8.11, implying that their latest estimates don't have a long term impact on what they think the stock is worth. 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 Arbutus Biopharma, with the most bullish analyst valuing it at CA$8.94 and the most bearish at CA$3.97 per share. This is a fairly broad spread of estimates, suggesting that the analysts are forecasting a wide range of possible outcomes for the business.

Looking at the bigger picture now, one of the ways we can make sense of these forecasts is to see how they measure up against both past performance and industry growth estimates. The analysts are definitely expecting Arbutus Biopharma's growth to accelerate, with the forecast 79% annualised growth to the end of 2022 ranking favourably alongside historical growth of 23% per annum over the past five years. By contrast, our data suggests that other companies (with analyst coverage) in a similar industry are forecast to grow their revenue at 15% per year. Factoring in the forecast acceleration in revenue, it's pretty clear that Arbutus Biopharma is expected to grow much faster than its industry.

The Bottom Line

The highlight for us was that the consensus reduced its estimated losses this year, perhaps suggesting Arbutus Biopharma is moving incrementally towards profitability. They also upgraded their revenue estimates for this year, and sales are expected to grow faster than the wider market. Some investors might be disappointed to see that the price target is unchanged, but we feel that improving fundamentals are usually a positive - assuming these forecasts are met! So Arbutus Biopharma could be a good candidate for more research.

These earnings upgrades look like a sterling endorsement, but before diving in - you should know that we've spotted 2 potential concern with Arbutus Biopharma, including major dilution from new stock issuance in the past year. For more information, you can click through to our platform to learn more about this and the 1 other concern we've identified .

Of course, seeing company management invest large sums of money in a stock can be just as useful as knowing whether analysts are upgrading their estimates. So you may also wish to search this free list of stocks that insiders are buying.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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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