The Consensus EPS Estimates For Wave Life Sciences Ltd. (NASDAQ:WVE) Just Fell Dramatically
Market forces rained on the parade of Wave Life Sciences Ltd. (NASDAQ:WVE) shareholders today, when the analysts downgraded their forecasts for this year. Revenue and earnings per share (EPS) forecasts were both revised downwards, with the analysts seeing grey clouds on the horizon. Shares are up 4.2% to US$3.99 in 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.
Following the downgrade, the current consensus from Wave Life Sciences' six analysts is for revenues of US$33m in 2023 which - if met - would reflect a sizeable 119% increase on its sales over the past 12 months. Losses are expected to be contained, narrowing 13% from last year to US$1.35. Yet before this consensus update, the analysts had been forecasting revenues of US$46m and losses of US$1.19 per share in 2023. 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 Wave Life Sciences
There was no major change to the consensus price target of US$8.57, signalling that the business is performing roughly in line with expectations, despite lower earnings per share forecasts. It could also be instructive to look at the range of analyst estimates, to evaluate how different the outlier opinions are from the mean. There are some variant perceptions on Wave Life Sciences, with the most bullish analyst valuing it at US$17.00 and the most bearish at US$4.00 per share. With such a wide range in price targets, the analysts are almost certainly betting on widely diverse outcomes for the underlying business. With this in mind, we wouldn't rely too heavily on the consensus price target, as it is just an average and analysts clearly have some deeply divergent views on the business.
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. The analysts are definitely expecting Wave Life Sciences' growth to accelerate, with the forecast 185% annualised growth to the end of 2023 ranking favourably alongside historical growth of 16% per annum over the past five years. By contrast, our data suggests that other companies (with analyst coverage) in a similar industry are forecast to grow their revenue at 6.9% per year. Factoring in the forecast acceleration in revenue, it's pretty clear that Wave Life Sciences is expected to grow much faster than its industry.
The Bottom Line
The most important thing to take away is that analysts increased their loss per share estimates for this year. Unfortunately, analysts also downgraded their revenue estimates, although our data indicates revenues are expected to perform better than the wider market. The lack of change in the price target is puzzling in light of the downgrade but, with a serious decline expected this year, we wouldn't be surprised if investors were a bit wary of Wave Life Sciences.
There might be good reason for analyst bearishness towards Wave Life Sciences, like major dilution from new stock issuance in the past year. Learn more, and discover the 2 other risks we've identified, for 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.
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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. 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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