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Today is shaping up negative for Affimed N.V. (NASDAQ:AFMD) shareholders, with the analysts delivering a substantial negative revision to this year's forecasts. Revenue and earnings per share (EPS) forecasts were both revised downwards, with analysts seeing grey clouds on the horizon.
Following the latest downgrade, the current consensus, from the five analysts covering Affimed, is for revenues of €18m in 2020, which would reflect a definite 17% reduction in Affimed's sales over the past 12 months. Per-share losses are expected to explode, reaching €0.70 per share. Yet before this consensus update, the analysts had been forecasting revenues of €23m and losses of €0.59 per share in 2020. 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.
The consensus price target was broadly unchanged at €6.25, perhaps implicitly signalling that the weaker earnings outlook is not expected to have a long-term impact on the valuation. 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. The most optimistic Affimed analyst has a price target of €9.23 per share, while the most pessimistic values it at €4.61. This is a fairly broad spread of estimates, suggesting that the analysts are forecasting a wide range of possible outcomes for the business.
Of course, another way to look at these forecasts is to place them into context against the industry itself. These estimates imply that sales are expected to slow, with a forecast revenue decline of 17%, a significant reduction from annual growth of 44% over the last five years. By contrast, our data suggests that other companies (with analyst coverage) in the same industry are forecast to see their revenue grow 18% annually for the foreseeable future. It's pretty clear that Affimed's revenues are expected to perform substantially worse than the wider 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, and industry data suggests that Affimed's revenues are expected to grow slower than the wider market. We're also surprised to see that the price target went unchanged. Still, deteriorating business conditions (assuming accurate forecasts!) can be a leading indicator for the stock price, so we wouldn't blame investors for being more cautious on Affimed after the downgrade.
Even so, the longer term trajectory of the business is much more important for the value creation of shareholders. We have estimates - from multiple Affimed analysts - going out to 2024, 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.
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