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Market forces rained on the parade of Ascendis Pharma A/S (NASDAQ:ASND) shareholders today, when the analysts downgraded their forecasts for this year. This report focused on revenue estimates, and it looks as though the consensus view of the business has become substantially more conservative. The stock price has risen 9.4% to €139 over the past week. Investors could be forgiven for changing their mind on the business following the downgrade; but it's not clear if the revised forecasts will lead to selling activity.
After the downgrade, the consensus from Ascendis Pharma's twelve analysts is for revenues of €8.5m in 2020, which would reflect a concerning 37% decline in sales compared to the last year of performance. Losses are expected to increase substantially, hitting €5.58 per share. Yet before this consensus update, the analysts had been forecasting revenues of €9.6m and losses of €5.59 per share in 2020. So there's definitely been a change in sentiment in this update, with the analysts administering a substantial haircut to this year's revenue estimates, while at the same time holding losses per share steady.
The consensus price target rose 5.5% to €161, seeming to imply that weaker revenue sentiment is not expected to have a major impact on the company's valuation. The consensus price target is just an average of individual analyst targets, so - it could be handy to see how wide the range of underlying estimates is. The most optimistic Ascendis Pharma analyst has a price target of €201 per share, while the most pessimistic values it at €137. This shows there is still some diversity in estimates, but analysts don't appear to be totally split on the stock as though it might be a success or failure situation.
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 37% revenue decline a notable change from historical growth of 8.7% 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 16% annually for the foreseeable future. So although its revenues are forecast to shrink, this cloud does not come with a silver lining - Ascendis Pharma is expected to lag the wider industry.
The Bottom Line
Unfortunately analysts also downgraded their revenue estimates, and industry data suggests that Ascendis Pharma's revenues are expected to grow slower than the wider market. There was also a nice increase in the price target, with analysts apparently feeling that the intrinsic value of the business is improving. Overall, given the drastic downgrade to this year's forecasts, we'd be feeling a little more wary of Ascendis Pharma going forwards.
Still, the long-term prospects of the business are much more relevant than next year's earnings. We have estimates - from multiple Ascendis Pharma analysts - going out to 2024, 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.
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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