U.S. Markets open in 9 hrs 18 mins
  • S&P Futures

    4,702.25
    +17.25 (+0.37%)
     
  • Dow Futures

    35,809.00
    +96.00 (+0.27%)
     
  • Nasdaq Futures

    16,396.25
    +78.25 (+0.48%)
     
  • Russell 2000 Futures

    2,265.20
    +11.30 (+0.50%)
     
  • Crude Oil

    71.87
    -0.18 (-0.25%)
     
  • Gold

    1,790.20
    +5.50 (+0.31%)
     
  • Silver

    22.51
    -0.01 (-0.06%)
     
  • EUR/USD

    1.1293
    +0.0020 (+0.1807%)
     
  • 10-Yr Bond

    1.4800
    +0.0320 (+2.21%)
     
  • Vix

    21.89
    -6.06 (-21.68%)
     
  • GBP/USD

    1.3253
    +0.0011 (+0.0861%)
     
  • USD/JPY

    113.4900
    -0.0500 (-0.0440%)
     
  • BTC-USD

    50,349.34
    -852.64 (-1.67%)
     
  • CMC Crypto 200

    1,302.21
    -139.55 (-9.68%)
     
  • FTSE 100

    7,339.90
    +210.69 (+2.96%)
     
  • Nikkei 225

    28,856.69
    +401.09 (+1.41%)
     

Analysts Are More Bearish On Zai Lab Limited (NASDAQ:ZLAB) Than They Used To Be

  • Oops!
    Something went wrong.
    Please try again later.
·3 min read
In this article:
  • Oops!
    Something went wrong.
    Please try again later.

The analysts covering Zai Lab Limited (NASDAQ:ZLAB) 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) estimates were cut sharply as the analysts factored in the latest outlook for the business, concluding that they were too optimistic previously.

Following the downgrade, the most recent consensus for Zai Lab from its twelve analysts is for revenues of US$120m in 2021 which, if met, would be a huge 318% increase on its sales over the past 12 months. The loss per share is expected to ameliorate slightly, reducing to US$3.19. Yet prior to the latest estimates, the analysts had been forecasting revenues of US$225m and losses of US$2.73 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.

Check out our latest analysis for Zai Lab

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

Analysts lifted their price target 11% to US$190, implicitly signalling that lower earnings per share are not expected to have a longer-term impact on the stock's value. It could also be instructive to look at the range of analyst estimates, to evaluate how different the outlier opinions are from the mean. Currently, the most bullish analyst values Zai Lab at US$262 per share, while the most bearish prices it at US$96.97. This is a fairly broad spread of estimates, suggesting that the analysts are forecasting a wide range of possible outcomes for the business.

These estimates are interesting, but it can be useful to paint some more broad strokes when seeing how forecasts compare, both to the Zai Lab's past performance and to peers in the same industry. It's pretty clear that there is an expectation that Zai Lab's revenue growth will slow down substantially, with revenues to the end of 2021 expected to display 3x growth on an annualised basis. This is compared to a historical growth rate of 699% over the past year. Juxtapose this against the other companies in the industry with analyst coverage, which are forecast to grow their revenues (in aggregate) 18% per year. Even after the forecast slowdown in growth, it seems obvious that Zai Lab is also expected to grow faster than the wider industry.

The Bottom Line

The most important thing to note from this downgrade is that the consensus increased its forecast losses this year, suggesting all may not be well at Zai Lab. Unfortunately, analysts also downgraded their revenue estimates, although our data indicates revenues are expected to perform better than the wider market. The increasing price target is not intuitively what we would expect to see, given these downgrades, and we'd suggest shareholders revisit their investment thesis before making a decision.

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 Zai Lab going out to 2025, 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.

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