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There's been a notable change in appetite for Fate Therapeutics, Inc. (NASDAQ:FATE) shares in the week since its yearly report, with the stock down 19% to US$89.72. Revenues of US$31m crushed expectations, although expenses increased commensurately, with statutory losses hitting US$2.10 per share, -14% above what the analysts expected. Earnings are an important time for investors, as they can track a company's performance, look at what the analysts are forecasting for next year, and see if there's been a change in sentiment towards the company. So we collected the latest post-earnings statutory consensus estimates to see what could be in store for next year.
Following the recent earnings report, the consensus from 13 analysts covering Fate Therapeutics is for revenues of US$25.6m in 2021, implying a definite 19% decline in sales compared to the last 12 months. Losses are supposed to decline, shrinking 14% from last year to US$1.81. Yet prior to the latest earnings, the analysts had been forecasting revenues of US$21.0m and losses of US$1.74 per share in 2021. Ergo, there's been a clear change in sentiment, with the analysts lifting this year's revenue estimates, while at the same time increasing their loss per share numbers to reflect the cost of achieving this growth.
The average price target rose 9.6% to US$107, even thoughthe analysts have been updating their forecasts to show higher revenues and higher forecast losses. 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. There are some variant perceptions on Fate Therapeutics, with the most bullish analyst valuing it at US$135 and the most bearish at US$58.00 per share. 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.
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 19% revenue decline a notable change from historical 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 19% next year. It's pretty clear that Fate Therapeutics' 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 increased their loss per share estimates for next year. They also upgraded their revenue estimates for next year, even though sales are expected to grow slower than the wider industry. There was also a nice increase in the price target, with the analysts clearly feeling that the intrinsic value of the business is improving.
Following on from that line of thought, we think that the long-term prospects of the business are much more relevant than next year's earnings. We have forecasts for Fate Therapeutics going out to 2025, and you can see them free on our platform here.
That said, it's still necessary to consider the ever-present spectre of investment risk. We've identified 4 warning signs with Fate Therapeutics , and understanding these should be part of your investment process.
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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