It's been a sad week for Lineage Cell Therapeutics, Inc. (NYSEMKT:LCTX), who've watched their investment drop 18% to US$0.75 in the week since the company reported its full-year result. Revenues of US$3.5m crushed expectations, although expenses also blew out, with the company reporting a statutory loss per share of US$0.08, 25% bigger than analysts expected. Earnings are an important time for investors, as they can track a company's performance, look at what top analysts are forecasting for next year, and see if there's been a change in sentiment towards the company. We've gathered the most recent statutory forecasts to see whether analysts have changed their earnings models, following these results.
Taking into account the latest results, the current consensus, from the three analysts covering Lineage Cell Therapeutics, is for revenues of US$3.10m in 2020, which would reflect a not inconsiderable 12% reduction in Lineage Cell Therapeutics's sales over the past 12 months. Losses are predicted to fall substantially, shrinking 211% (on a statutory basis) to US$0.25. Before this earnings announcement, analysts had been forecasting revenues of US$2.04m and losses of US$0.23 per share in 2020. So we can see there's been a pretty clear increase in analyst sentiment following the latest results, with both revenues and earnings per share receiving a decent lift in the latest estimates.
Spiting the revenue upgrading, the average analyst price target fell 23% to US$3.67, clearly signalling that higher forecast losses are a valuation concern. Fixating on a single price target can be unwise though, since the consensus target is effectively the average of analyst price targets. As a result, some investors like to look at the range of estimates to see if there are any diverging opinions on the company's valuation. The most optimistic Lineage Cell Therapeutics analyst has a price target of US$4.00 per share, while the most pessimistic values it at US$3.00. The narrow spread of estimates could suggest that the business' future is relatively easy to value, or that analysts have a clear view on its prospects.
Another way to assess these estimates is by comparing them to past performance, and seeing whether analysts are more or less bullish relative to other companies in the market. One more thing stood out to us about these estimates, and it's that Lineage Cell Therapeutics's decline is expected to slow down, with revenues forecast to fall 12% next year, improving on a historical decline of 12% a year over the past five years. By contrast, our data suggests that other companies (with analyst coverage) in the market are forecast to see their revenue decline 16% per year. So while it's not great to see that analysts are expecting a decline, at least Lineage Cell Therapeutics is forecast to shrink at a slower rate than the wider market.
The Bottom Line
Fortunately, analysts also upgraded their revenue estimates, although our data indicates sales are expected to 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 Lineage Cell Therapeutics'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 Lineage Cell Therapeutics going out to 2024, and you can see them free on our platform here..
Another thing to consider is whether management and directors have been buying or selling stock recently. We provide an overview of all open market stock trades for the last twelve months on our platform, here.
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