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Market forces rained on the parade of CASI Pharmaceuticals, Inc. (NASDAQ:CASI) shareholders today, when the analysts downgraded their forecasts for this year. Revenue and earnings per share (EPS) forecasts were both revised downwards, with analysts seeing grey clouds on the horizon. Bidders are definitely seeing a different story, with the stock price of US$2.09 reflecting a 16% rise in the past week. With such a sharp increase, it seems brokers may have seen something that is not yet being priced in by the wider market.
After this downgrade, CASI Pharmaceuticals' twin analysts are now forecasting revenues of US$7.9m in 2020. This would be a sizeable 91% improvement in sales compared to the last 12 months. Losses are presumed to reduce, shrinking 10% from last year to US$0.43. Yet before this consensus update, the analysts had been forecasting revenues of US$19m and losses of US$0.30 per share in 2020. 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 fell 23% to US$5.84, with the analysts clearly concerned about the company following the weaker revenue and earnings outlook. 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. Currently, the most bullish analyst values CASI Pharmaceuticals at US$8.17 per share, while the most bearish prices it at US$3.50. 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 CASI Pharmaceuticals' past performance and to peers in the same industry. We can infer from the latest estimates that forecasts expect a continuation of CASI Pharmaceuticals'historical trends, as next year's 91% revenue growth is roughly in line with 108% annual revenue growth over the past five years. By contrast, our data suggests that other companies (with analyst coverage) in a similar industry are forecast to see their revenues grow 16% per year. So it's pretty clear that CASI Pharmaceuticals is forecast to grow substantially 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 CASI Pharmaceuticals. While analysts did downgrade their revenue estimates, these forecasts still imply revenues will perform better than the wider market. Given the scope of the downgrades, it would not be a surprise to see the market become more wary of the business.
So things certainly aren't looking great, and you should also know that we've spotted some potential warning signs with CASI Pharmaceuticals, including a short cash runway. For more information, you can click here to discover this and the 4 other concerns we've identified.
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