Editas Medicine, Inc. (NASDAQ:EDIT) came out with its quarterly results last week, and we wanted to see how the business is performing and what industry forecasters think of the company following this report. In addition to smashing expectations with revenues of US$63m, Editas Medicine delivered a surprise statutory profit of US$0.12 per share, a notable improvement compared to analyst expectations of a loss. 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. Readers will be glad to know we've aggregated the latest statutory forecasts to see whether the analysts have changed their mind on Editas Medicine after the latest results.
Following the recent earnings report, the consensus from seven analysts covering Editas Medicine is for revenues of US$22.2m in 2021, implying a concerning 32% decline in sales compared to the last 12 months. Per-share losses are expected to explode, reaching US$3.29 per share. Before this latest report, the consensus had been expecting revenues of US$23.8m and US$3.39 per share in losses. So there seems to have been a moderate uplift in analyst sentiment with the latest consensus release, given the upgrade to loss per share forecasts for next year.
The consensus price target fell 8.7% to US$38.11, with the dip in revenue estimates clearly souring sentiment, despite the forecast reduction in losses. It could also be instructive to look at the range of analyst estimates, to evaluate how different the outlier opinions are from the mean. Currently, the most bullish analyst values Editas Medicine at US$60.00 per share, while the most bearish prices it at US$14.00. So we wouldn't be assigning too much credibility to analyst price targets in this case, because there are clearly some widely different views on what kind of performance this business can generate. As a result it might not be a great idea to make decisions based on the consensus price target, which is after all just an average of this wide range of estimates.
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. These estimates imply that sales are expected to slow, with a forecast revenue decline of 32%, a significant reduction from annual growth of 42% over the last five years. Compare this with our data, which suggests that other companies in the same industry are, in aggregate, expected to see their revenue grow 20% next year. So although its revenues are forecast to shrink, this cloud does not come with a silver lining - Editas Medicine is expected to lag the wider industry.
The Bottom Line
The most obvious conclusion is that the analysts made no changes to their forecasts for a loss next year. Unfortunately, they also downgraded their revenue estimates, and our data indicates revenues are expected to perform worse than the wider industry. Even so, earnings per share are more important to the intrinsic value of the business. Yet - earnings are more important to the intrinsic value of the business. The consensus price target fell measurably, with the analysts seemingly not reassured by the latest results, leading to a lower estimate of Editas Medicine's future valuation.
Keeping that in mind, we still think that the longer term trajectory of the business is much more important for investors to consider. At Simply Wall St, we have a full range of analyst estimates for Editas Medicine going out to 2024, and you can see them free on our platform here..
You still need to take note of risks, for example - Editas Medicine has 3 warning signs we think you should be aware of.
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. 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.
Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email firstname.lastname@example.org.