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Arena Pharmaceuticals, Inc. Full-Year Results Just Came Out: Here's What Analysts Are Forecasting For Next Year

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Simply Wall St
·4 min read
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It's been a mediocre week for Arena Pharmaceuticals, Inc. (NASDAQ:ARNA) shareholders, with the stock dropping 16% to US$44.10 in the week since its latest full-year results. It looks like the results were a bit of a negative overall. While revenues of US$806m were in line with analyst predictions, statutory earnings were less than expected, missing estimates by 4.9% to hit US$7.69 per share. This is an important time for investors, as they can track a company's performance in its report, look at what top analysts are forecasting for next year, and see if there has been any change to expectations for the business. We've gathered the most recent statutory forecasts to see whether analysts have changed their earnings models, following these results.

Check out our latest analysis for Arena Pharmaceuticals

NasdaqGS:ARNA Past and Future Earnings, February 28th 2020
NasdaqGS:ARNA Past and Future Earnings, February 28th 2020

Taking into account the latest results, the seven analysts covering Arena Pharmaceuticals provided consensus estimates of US$6.84m revenue in 2020, which would reflect a painful 99% decline on its sales over the past 12 months. The company is expected to report a statutory loss of US$8.02 in 2020, a sharp decline from a profit over the last year. Yet prior to the latest earnings, analysts had been forecasting revenues of US$6.66m and losses of US$6.47 per share in 2020. While next year's revenue estimates increased, there was also a large cut to EPS expectations, suggesting the consensus has a bit of a mixed view of these results.

There was no major change to the consensus price target of US$66.27, with growing revenues seemingly enough to offset the concern of growing 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 Arena Pharmaceuticals at US$80.00 per share, while the most bearish prices it at US$51.00. As you can see, analysts are not all in agreement on the stock's future, but the range of estimates is still reasonably narrow, which could suggest that the outcome is not totally unpredictable.

It can be useful to take a broader overview by seeing how analyst forecasts compare, both to the Arena Pharmaceuticals's past performance and to peers in the same market. These estimates imply that sales are expected to slow, with a forecast revenue decline of 99% a significant reduction from annual growth of 71% over the last five years. Compare this with our data, which suggests that other companies in the same market are, in aggregate, expected to see their revenue grow 16% next year. So although its revenues are forecast to shrink, this cloud does not come with a silver lining - analysts also expect Arena Pharmaceuticals to grow slower than the wider market.

The Bottom Line

They also upgraded their revenue estimates for next year, even though sales are expected to grow slower than the wider market. There was no real change to the consensus price target, suggesting that the intrinsic value of the business has not undergone any major changes with the latest estimates.

With that in mind, we wouldn't be too quick to come to a conclusion on Arena Pharmaceuticals. Long-term earnings power is much more important than next year's profits. We have estimates - from multiple Arena Pharmaceuticals analysts - going out to 2024, and you can see them free on our platform here.

You can also see our analysis of Arena Pharmaceuticals's Board and CEO remuneration and experience, and whether company insiders have been buying stock.

If you spot an error that warrants correction, please contact the editor at editorial-team@simplywallst.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.

We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Thank you for reading.