Celebrations may be in order for Arbutus Biopharma Corporation (NASDAQ:ABUS) shareholders, with the analysts delivering a significant upgrade to their statutory estimates for the company. The analysts greatly increased their revenue estimates, suggesting a stark improvement in business fundamentals. Arbutus Biopharma has also found favour with investors, with the stock up a whopping 46% to US$2.10 over the past week. Could this upgrade be enough to drive the stock even higher?
Following the latest upgrade, the six analysts covering Arbutus Biopharma provided consensus estimates of US$6.1m revenue in 2020, which would reflect an uneasy 10% decline on its sales over the past 12 months. Losses are predicted to fall substantially, shrinking 66% to US$0.89. Yet before this consensus update, the analysts had been forecasting revenues of US$4.5m and losses of US$1.17 per share in 2020. So there's been quite a change-up of views after the recent consensus updates, with the analysts making a sizeable increase to their revenue forecasts while also reducing the estimated loss as the business grows towards breakeven.
Despite these upgrades, the analysts have not made any major changes to their price target of CA$6.54, implying that their latest estimates don't have a long term impact on what they think the stock is worth. 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 Arbutus Biopharma at CA$14.04 per share, while the most bearish prices it at CA$1.32. 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. One thing that stands out from these estimates is that shrinking revenues are expected to moderate from the historical decline of 26% per annum over the past five years.
The Bottom Line
The highlight for us was that the consensus reduced its estimated losses this year, perhaps suggesting Arbutus Biopharma is moving incrementally towards profitability. Pleasantly, analysts also upgraded their revenue estimates, and their forecasts suggest the business is expected to grow slower than the wider market. The lack of change in the price target is puzzling, but with a serious upgrade to this year's earnings expectations, it might be time to take another look at Arbutus Biopharma.
Even so, the longer term trajectory of the business is much more important for the value creation of shareholders. At Simply Wall St, we have a full range of analyst estimates for Arbutus Biopharma 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 upgrading their estimates. So you may also wish to search this free list of stocks that insiders are buying.
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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. Thank you for reading.