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Bearish: Analysts Just Cut Their Denali Therapeutics Inc. (NASDAQ:DNLI) Revenue and EPS estimates

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The latest analyst coverage could presage a bad day for Denali Therapeutics Inc. (NASDAQ:DNLI), with the analysts making across-the-board cuts to their statutory estimates that might leave shareholders a little shell-shocked. Revenue and earnings per share (EPS) forecasts were both revised downwards, with analysts seeing grey clouds on the horizon.

After the downgrade, the consensus from Denali Therapeutics' eleven analysts is for revenues of US$92m in 2021, which would reflect a stressful 73% decline in sales compared to the last year of performance. After this downgrade, the company is anticipated to report a loss of US$1.88 in 2021, a sharp decline from a profit over the last year. However, before this estimates update, the consensus had been expecting revenues of US$143m and US$1.64 per share in losses. 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.

See our latest analysis for Denali Therapeutics

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

Taking a look at the bigger picture now, one of the ways we can understand these forecasts is to see how they compare to both past performance and industry growth estimates. We would highlight that sales are expected to reverse, with a forecast 83% annualised revenue decline to the end of 2021. That is a notable change from historical growth of 68% over the last three 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 - Denali Therapeutics is expected to lag 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 Denali Therapeutics. Regrettably, they also downgraded their revenue estimates, and the latest forecasts imply the business will grow sales slower than the wider market. We wouldn't be surprised to find shareholders feeling a bit shell-shocked, after these downgrades. It looks like analysts have become a lot more bearish on Denali Therapeutics, and their negativity could be grounds for caution.

So things certainly aren't looking great, and you should also know that we've spotted some potential warning signs with Denali Therapeutics, including dilutive stock issuance over the past year. For more information, you can click here to discover this and the 3 other warning signs we've identified.

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.

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