Shareholders of Kadmon Holdings, Inc. (NYSE:KDMN) will be pleased this week, given that the stock price is up 10% to US$4.38 following its latest first-quarter results. Revenues of US$6.7m crushed expectations, although expenses also blew out, with the company reporting a statutory loss per share of US$0.19, 32% bigger than analysts expected. Following the result, the analysts have updated their earnings model, and it would be good to know whether they think there's been a strong change in the company's prospects, or if it's business as usual. 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 four analysts covering Kadmon Holdings, is for revenues of US$918.5k in 2020, which would reflect a painful 92% reduction in Kadmon Holdings' sales over the past 12 months. Losses are supposed to decline, shrinking 12% from last year to US$0.60. Before this earnings announcement, the analysts had been modelling revenues of US$2.26m and losses of US$0.61 per share in 2020. 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.
The average price target fell 8.6% to US$12.80, with the analysts clearly concerned about the weaker revenue outlook and expectation of ongoing losses. There's another way to think about price targets though, and that's to look at the range of price targets put forward by analysts, because a wide range of estimates could suggest a diverse view on possible outcomes for the business. Currently, the most bullish analyst values Kadmon Holdings at US$25.00 per share, while the most bearish prices it at US$8.00. So we wouldn't be assigning too much credibility to analyst price targets in this case, because there are clearly some widely different views on what kind of performance this business can generate. With this in mind, we wouldn't rely too heavily the consensus price target, as it is just an average and analysts clearly have some deeply divergent views on the 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. One more thing stood out to us about these estimates, and it's the idea that Kadmon Holdings'decline is expected to accelerate, with revenues forecast to fall 92% next year, topping off a historical decline of 66% a year over the past three years. Compare this against analyst estimates for companies in the wider industry, which suggest that revenues (in aggregate) are expected to grow 21% next year. So while a broad number of companies are forecast to decline, unfortunately Kadmon Holdings is expected to see its sales affected worse than other companies in the industry.
The Bottom Line
The most obvious conclusion is that the analysts made no changes to their forecasts for a loss next year. Unfortunately, they also downgraded their revenue estimates, and our data indicates revenues are expected to perform worse than the wider industry. Even so, earnings per share are more important to the intrinsic value of the business. The consensus price target fell measurably, with the analysts seemingly not reassured by the latest results, leading to a lower estimate of Kadmon Holdings' future valuation.
With that in mind, we wouldn't be too quick to come to a conclusion on Kadmon Holdings. Long-term earnings power is much more important than next year's profits. At Simply Wall St, we have a full range of analyst estimates for Kadmon Holdings going out to 2024, and you can see them free on our platform here..
Don't forget that there may still be risks. For instance, we've identified 2 warning signs for Kadmon Holdings that you should be aware of.
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