It's been a pretty great week for Editas Medicine, Inc. (NASDAQ:EDIT) shareholders, with its shares surging 11% to US$24.71 in the week since its latest quarterly results. Revenues of US$5.7m fell short of estimates by 15%, but statutory losses were tightly controlled, with the per-share loss of US$0.69 being 12% smaller than consensus predictions. The 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 the analysts have changed their mind on Editas Medicine after the latest results.
Following last week's earnings report, Editas Medicine's seven analysts are forecasting 2020 revenues to be US$24.2m, approximately in line with the last 12 months. Per-share losses are supposed to see a sharp uptick, reaching US$3.23. Before this latest report, the consensus had been expecting revenues of US$27.1m and US$3.26 per share in losses. So there's definitely been a change in sentiment in this update, with the analysts administering a substantial haircut to next year's revenue estimates, while at the same time holding losses per share steady.
There was no real change to the average price target of US$36.88, suggesting that the revisions to revenue estimates are not expected to have a long-term impact on Editas Medicine's valuation. That's not the only conclusion we can draw from this data however, as some investors also like to consider the spread in estimates when evaluating analyst price targets. There are some variant perceptions on Editas Medicine, with the most bullish analyst valuing it at US$55.00 and the most bearish at US$26.00 per share. This is a fairly broad spread of estimates, suggesting that analysts are forecasting a wide range of possible outcomes for the business.
Looking at the bigger picture now, one of the ways we can make sense of these forecasts is to see how they measure up against both past performance and industry growth estimates. We would highlight that sales are expected to reverse, with the forecast 0.06% revenue decline a notable change from historical growth of 45% 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 21% annually for the foreseeable future. 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 important thing to take away is that the analysts reconfirmed their loss per share estimates for next year. On the negative side, they also downgraded their revenue estimates, and forecasts imply revenues will perform worse than the wider industry. The consensus price target held steady at US$36.88, with the latest estimates not enough to have an impact on their price targets.
With that in mind, we wouldn't be too quick to come to a conclusion on Editas Medicine. Long-term earnings power is much more important than next year's profits. We have forecasts for Editas Medicine going out to 2024, and you can see them free on our platform here.
Before you take the next step you should know about the 3 warning signs for Editas Medicine that we have uncovered.
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