What Does The Future Hold For Morphic Holding, Inc. (NASDAQ:MORF)? These Analysts Have Been Cutting Their Estimates
One thing we could say about the analysts on Morphic Holding, Inc. (NASDAQ:MORF) - they aren't optimistic, having just made a major negative revision to their near-term (statutory) forecasts for the organization. There was a fairly draconian cut to their revenue estimates, perhaps an implicit admission that previous forecasts were much too optimistic. At US$47.26, shares are up 5.4% in the past 7 days. We'd be curious to see if the downgrade is enough to reverse investor sentiment on the business.
Following the latest downgrade, the eight analysts covering Morphic Holding provided consensus estimates of US$5.3m revenue in 2023, which would reflect a sizeable 92% decline on its sales over the past 12 months. Per-share losses are expected to explode, reaching US$3.62 per share. Yet prior to the latest estimates, the analysts had been forecasting revenues of US$6.1m and losses of US$3.39 per share in 2023. 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.
Check out our latest analysis for Morphic Holding
Analysts lifted their price target 14% to US$73.88, implicitly signalling that lower earnings per share are not expected to have a longer-term impact on the stock's value. 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. There are some variant perceptions on Morphic Holding, with the most bullish analyst valuing it at US$106 and the most bearish at US$60.00 per share. Note the wide gap in analyst price targets? This implies to us that there is a fairly broad range of possible scenarios for the underlying 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. We would highlight that sales are expected to reverse, with a forecast 97% annualised revenue decline to the end of 2023. That is a notable change from historical growth of 39% 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 14% annually for the foreseeable future. It's pretty clear that Morphic Holding's revenues are expected to perform substantially worse than 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 Morphic Holding. Regrettably, they also downgraded their revenue estimates, and the latest forecasts imply the business will grow sales 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 Morphic Holding going forwards.
That said, the analysts might have good reason to be negative on Morphic Holding, given dilutive stock issuance over the past year. For more information, you can click here to discover this and the 3 other risks we've identified.
Another way to search for interesting companies that could be reaching an inflection point is to track whether management are buying or selling, with our free list of growing companies 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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