Equillium, Inc. (NASDAQ:EQ) Just Reported, And Analysts Assigned A US$6.06 Price Target
Equillium, Inc. (NASDAQ:EQ) investors will be delighted, with the company turning in some strong numbers with its latest results. Revenue crushed expectations at US$9.1m, beating expectations by 49%. Equillium reported a statutory loss of US$0.10 per share, which - although not amazing - was much smaller than the analysts predicted. 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. We've gathered the most recent statutory forecasts to see whether the analysts have changed their earnings models, following these results.
See our latest analysis for Equillium
After the latest results, the consensus from Equillium's five analysts is for revenues of US$26.2m in 2023, which would reflect a sizeable 22% decline in revenue compared to the last year of performance. Per-share losses are supposed to see a sharp uptick, reaching US$0.59. Yet prior to the latest earnings, the analysts had been forecasting revenues of US$25.9m and losses of US$0.64 per share in 2023. It looks like there's been a modest increase in sentiment in the recent updates, with the analysts becoming a bit more optimistic in their predictions for losses per share, even though the revenue numbers were unchanged.
Even with the lower forecast losses, the analysts lowered their valuations, with the average price target falling 35% to US$6.06. It looks likethe analysts have become less optimistic about the overall business. 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. Currently, the most bullish analyst values Equillium at US$8.00 per share, while the most bearish prices it at US$2.80. Note the wide gap in analyst price targets? This implies to us that there is a fairly broad range of possible scenarios for the underlying business.
Of course, another way to look at these forecasts is to place them into context against the industry itself. These estimates imply that revenue is expected to slow, with a forecast annualised decline of 40% by the end of 2023. This indicates a significant reduction from annual growth of 105% 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 15% per year. It's pretty clear that Equillium's revenues are expected to perform substantially worse than 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. Fortunately, the analysts also reconfirmed their revenue estimates, suggesting that it's tracking in line with expectations. Although our data does suggest that Equillium's revenue is expected to perform worse than the wider industry. The consensus price target fell measurably, with the analysts seemingly not reassured by the latest results, leading to a lower estimate of Equillium's future valuation.
With that in mind, we wouldn't be too quick to come to a conclusion on Equillium. Long-term earnings power is much more important than next year's profits. We have forecasts for Equillium going out to 2025, and you can see them free on our platform here.
However, before you get too enthused, we've discovered 4 warning signs for Equillium (1 shouldn't be ignored!) that you should be aware of.
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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. 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.
