The investors in 23andMe Holding Co.'s (NASDAQ:ME) will be rubbing their hands together with glee today, after the share price leapt 34% to US$4.42 in the week following its quarterly results. The results don't look great, especially considering that statutory losses grew 18% toUS$0.20 per share. Revenues of US$64,513,000 did beat expectations by 4.7%, but it looks like a bit of a cold comfort. Following the result, the analysts have updated their earnings model, and it would be good to know whether they think there's been a strong change in the company's prospects, or if it's business as usual. With this in mind, we've gathered the latest statutory forecasts to see what the analysts are expecting for next year.
Taking into account the latest results, 23andMe Holding's twin analysts currently expect revenues in 2023 to be US$274.9m, approximately in line with the last 12 months. Per-share losses are expected to explode, reaching US$0.81 per share. Before this earnings announcement, the analysts had been modelling revenues of US$272.9m and losses of US$0.82 per share in 2023.
As a result, it's unexpected to see that the consensus price target fell 41% to US$5.00, with the analysts seemingly becoming more concerned about ongoing losses, despite making no major changes to their forecasts.
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 annualised revenue decline of 1.1% by the end of 2023. This indicates a significant reduction from annual growth of 8.6% over the last year. By contrast, our data suggests that other companies (with analyst coverage) in the same industry are forecast to see their revenue grow 7.2% annually for the foreseeable future. So although its revenues are forecast to shrink, this cloud does not come with a silver lining - 23andMe Holding is expected to lag the wider industry.
The Bottom Line
The most important thing to take away is that the analysts reconfirmed their loss per share estimates for next year. On the plus side, there were no major changes to revenue estimates; although forecasts imply revenues will perform worse than the wider industry. The consensus price target fell measurably, with the analysts seemingly not reassured by the latest results, leading to a lower estimate of 23andMe Holding's future valuation.
With that in mind, we wouldn't be too quick to come to a conclusion on 23andMe Holding. Long-term earnings power is much more important than next year's profits. We have analyst estimates for 23andMe Holding going out as far as 2024, and you can see them free on our platform here.
Don't forget that there may still be risks. For instance, we've identified 3 warning signs for 23andMe Holding (1 makes us a bit uncomfortable) you should be aware of.
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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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