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Market forces rained on the parade of BeiGene, Ltd. (NASDAQ:BGNE) shareholders today, when the analysts downgraded their forecasts for this year. There was a fairly draconian cut to their revenue estimates, perhaps an implicit admission that previous forecasts were much too optimistic.
After the downgrade, the 20 analysts covering BeiGene are now predicting revenues of US$556m in 2021. If met, this would reflect a huge 80% improvement in sales compared to the last 12 months. Losses are expected to be contained, narrowing 13% from last year to US$16.73. Yet prior to the latest estimates, the analysts had been forecasting revenues of US$826m and losses of US$14.95 per share in 2021. Ergo, there's been a clear change in sentiment, with the analysts administering a notable cut to this year's revenue estimates, while at the same time increasing their loss per share forecasts.
The consensus price target was broadly unchanged at US$326, perhaps implicitly signalling that the weaker earnings outlook is not expected to have a long-term impact on the valuation. 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. The most optimistic BeiGene analyst has a price target of US$429 per share, while the most pessimistic values it at US$158. This is a fairly broad spread of estimates, suggesting that the analysts are forecasting a wide range of possible outcomes for the business.
Another way we can view these estimates is in the context of the bigger picture, such as how the forecasts stack up against past performance, and whether forecasts are more or less bullish relative to other companies in the industry. The analysts are definitely expecting BeiGene's growth to accelerate, with the forecast 80% annualised growth to the end of 2021 ranking favourably alongside historical growth of 42% per annum over the past five years. Compare this with other companies in the same industry, which are forecast to grow their revenue 19% annually. Factoring in the forecast acceleration in revenue, it's pretty clear that BeiGene is expected to grow much faster than its 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 BeiGene. While analysts did downgrade their revenue estimates, these forecasts still imply revenues will perform better than the wider market. Given the stark change in sentiment, we'd understand if investors became more cautious on BeiGene after today.
Even so, the longer term trajectory of the business is much more important for the value creation of shareholders. At Simply Wall St, we have a full range of analyst estimates for BeiGene 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.
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