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One thing we could say about the analysts on Epizyme, Inc. (NASDAQ:EPZM) - they aren't optimistic, having just made a major negative revision to their near-term (statutory) forecasts for the organization. This report focused on revenue estimates, and it looks as though the consensus view of the business has become substantially more conservative.
After the downgrade, the six analysts covering Epizyme are now predicting revenues of US$75m in 2021. If met, this would reflect a substantial improvement in sales compared to the last 12 months. Losses are forecast to hold steady at around US$2.21. However, before this estimates update, the consensus had been expecting revenues of US$94m and US$2.13 per share in losses. So there's been quite a change-up of views after the recent consensus updates, with the analysts making a serious cut to their revenue forecasts while also expecting losses per share to increase.
The consensus price target fell 14% to US$23.50, with the analysts clearly concerned about the company following the weaker revenue and earnings outlook. 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. The most optimistic Epizyme analyst has a price target of US$36.00 per share, while the most pessimistic values it at US$12.00. With such a wide range in price targets, the analysts are almost certainly betting on widely diverse outcomes for the underlying business. With this in mind, we wouldn't rely too heavily on the consensus price target, as it is just an average and analysts clearly have some deeply divergent views on the business.
One way to get more context on these forecasts is to look at how they compare to both past performance, and how other companies in the same industry are performing. It's clear from the latest estimates that Epizyme's rate of growth is expected to accelerate meaningfully, with the forecast 5x revenue growth noticeably faster than its historical growth of 26% p.a. over the past five years. Compare this with other companies in the same industry, which are forecast to grow their revenue 20% next year. It seems obvious that, while the growth outlook is brighter than the recent past, the analysts also expect Epizyme to grow faster than the wider industry.
The Bottom Line
The most important thing to take away is that analysts increased their loss per share estimates for next year. Unfortunately, analysts also downgraded their revenue estimates, although our data indicates revenues are expected to perform better than the wider market. The consensus price target fell measurably, with analysts seemingly not reassured by recent business developments, leading to a lower estimate of Epizyme's future valuation. Given the stark change in sentiment, we'd understand if investors became more cautious on Epizyme after today.
With that said, the long-term trajectory of the company's earnings is a lot more important than next year. We have estimates - from multiple Epizyme analysts - going out to 2024, and you can see them free on our platform here.
Of course, seeing company management invest large sums of money in a stock can be just as useful as knowing whether analysts are downgrading their estimates. So you may also wish to search this free list of stocks that insiders are buying.
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.
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