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Alkermes plc (NASDAQ:ALKS) just released its first-quarter report and things are looking bullish. Revenues and losses per share were both better than expected, with revenues of US$246m leading estimates by 6.8%. Statutory losses were smaller than the analystsexpected, coming in at US$0.24 per share. This is an important time for investors, as they can track a company's performance in its report, look at what experts are forecasting for next year, and see if there has been any change to expectations for the business. With this in mind, we've gathered the latest statutory forecasts to see what the analysts are expecting for next year.
Taking into account the latest results, the current consensus, from the twelve analysts covering Alkermes, is for revenues of US$977.7m in 2020, which would reflect an uneasy 18% reduction in Alkermes' sales over the past 12 months. Losses are forecast to balloon 30% to US$1.14 per share. Before this latest report, the consensus had been expecting revenues of US$1.04b and US$0.99 per share in losses. While this year's revenue estimates dropped there was also a loss per share expectations, suggesting the consensus has a bit of a mixed view on the stock.
The average price target fell 6.6% to US$19.14, implicitly signalling that lower earnings per share are a leading indicator for Alkermes' valuation. 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. Currently, the most bullish analyst values Alkermes at US$26.00 per share, while the most bearish prices it at US$16.00. These price targets show that analysts do have some differing views on the business, but the estimates do not vary enough to suggest to us that some are betting on wild success or utter failure.
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. We would highlight that sales are expected to reverse, with the forecast 18% revenue decline a notable change from historical growth of 14% over the last five years. By contrast, our data suggests that other companies (with analyst coverage) in the same industry are forecast to see their revenue grow 17% annually for the foreseeable future. It's pretty clear that Alkermes' revenues are expected to perform substantially worse than the wider industry.
The Bottom Line
The most important thing to note is the forecast of increased losses next year, suggesting all may not be well at Alkermes. On the negative side, they also downgraded their revenue estimates, and forecasts imply revenues will perform worse than the wider industry. The consensus price target fell measurably, with the analysts seemingly not reassured by the latest results, leading to a lower estimate of Alkermes' future valuation.
With that in mind, we wouldn't be too quick to come to a conclusion on Alkermes. Long-term earnings power is much more important than next year's profits. We have estimates - from multiple Alkermes analysts - going out to 2024, and you can see them free on our platform here.
That said, it's still necessary to consider the ever-present spectre of investment risk. We've identified 2 warning signs with Alkermes , and understanding them should be part of your investment process.
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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