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Earnings Release: Here's Why Analysts Cut Their Entasis Therapeutics Holdings Inc. Price Target To US$14.50

Simply Wall St
·4 min read

There's been a major selloff in Entasis Therapeutics Holdings Inc. (NASDAQ:ETTX) shares in the week since it released its yearly report, with the stock down 41% to US$3.08. Sales were dismal, with revenues of US$7.0m coming in some 38% below what analysts were forecasting. The only bright spot was that statutory losses of US$3.33 per share were 14% smaller than analysts had predicted. Analysts typically update their forecasts at each earnings report, and we can judge from their estimates whether their view of the company has changed or if there are any new concerns to be aware of. Readers will be glad to know we've aggregated the latest statutory forecasts to see whether analysts have changed their mind on Entasis Therapeutics Holdings after the latest results.

See our latest analysis for Entasis Therapeutics Holdings

NasdaqGM:ETTX Past and Future Earnings, March 13th 2020
NasdaqGM:ETTX Past and Future Earnings, March 13th 2020

Following the recent earnings report, the consensus fromthree analysts covering Entasis Therapeutics Holdings expects revenues of US$5.00m in 2020, implying a stressful 29% decline in sales compared to the last 12 months. The loss per share is expected to ameliorate slightly, reducing to US$3.62 on a statutory basis. Before this latest report, the consensus had been expecting revenues of US$5.00m and US$2.97 per share in losses. So there's definitely been a decline in analyst sentiment after the latest results, noting the pretty serious reduction to new EPS forecasts.

The consensus price target fell 19% to US$14.50 per share, with analysts clearly concerned by ballooning losses. 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 Entasis Therapeutics Holdings, with the most bullish analyst valuing it at US$18.00 and the most bearish at US$11.00 per share. There are definitely some different views on the stock, but the range of estimates is not wide enough as to imply that the situation is unforecastable, in our view.

It can be useful to take a broader overview by seeing how analyst forecasts compare, both to the Entasis Therapeutics Holdings's past performance and to peers in the same market. These estimates imply that sales are expected to slow, with a forecast revenue decline of 29% a significant reduction from annual growth of 40% over the last year. Compare this with our data, which suggests that other companies in the same market are, in aggregate, expected to see their revenue grow 16% next year. It's pretty clear that Entasis Therapeutics Holdings's revenues are expected to perform substantially worse than the wider market.

The Bottom Line

The most important thing to take away is that analysts reconfirmed their loss per share estimates for next year. On the plus side, there were no major changes to revenue estimates; although analyst forecasts imply revenues will perform worse than the wider market. The consensus price target fell measurably, with analysts seemingly not reassured by the latest results, leading to a lower estimate of Entasis Therapeutics Holdings's future valuation.

Still, the long-term prospects of the business are much more relevant than next year's earnings. At Simply Wall St, we have a full range of analyst estimates for Entasis Therapeutics Holdings going out to 2024, and you can see them free on our platform here..

You can also see our analysis of Entasis Therapeutics Holdings's Board and CEO remuneration and experience, and whether company insiders have been buying stock.

If you spot an error that warrants correction, please contact the editor at editorial-team@simplywallst.com. This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. Simply Wall St has no position in the stocks mentioned.

We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Thank you for reading.