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Forecast: Analysts Think Recursion Pharmaceuticals, Inc.'s (NASDAQ:RXRX) Business Prospects Have Improved Drastically

Recursion Pharmaceuticals, Inc. (NASDAQ:RXRX) shareholders will have a reason to smile today, with the analysts making substantial upgrades to next year's forecasts. The consensus statutory numbers for both revenue and earnings per share (EPS) increased, with their view clearly much more bullish on the company's business prospects. Investor sentiment seems to be improving too, with the share price up 9.9% to US$11.25 over the past 7 days. It will be interesting to see if this latest upgrade is enough to kickstart further buying interest in the stock.

Following the upgrade, the latest consensus from Recursion Pharmaceuticals' six analysts is for revenues of US$72m in 2023, which would reflect a huge 151% improvement in sales compared to the last 12 months. Losses are expected to increase slightly, to US$1.42 per share. Yet before this consensus update, the analysts had been forecasting revenues of US$54m and losses of US$1.64 per share in 2023. We can see there's definitely been a change in sentiment in this update, with the analysts administering a sizeable upgrade to next year's revenue estimates, while at the same time reducing their loss estimates.

See our latest analysis for Recursion Pharmaceuticals

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earnings-and-revenue-growth

There was no major change to the consensus price target of US$18.00, perhaps suggesting that the analysts remain concerned about ongoing losses despite the improved earnings and revenue outlook. 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. The most optimistic Recursion Pharmaceuticals analyst has a price target of US$38.00 per share, while the most pessimistic values it at US$9.00. 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.

These estimates are interesting, but it can be useful to paint some more broad strokes when seeing how forecasts compare, both to the Recursion Pharmaceuticals' past performance and to peers in the same industry. It's clear from the latest estimates that Recursion Pharmaceuticals' rate of growth is expected to accelerate meaningfully, with the forecast 109% annualised revenue growth to the end of 2023 noticeably faster than its historical growth of 73% p.a. over the past three years. Compare this with other companies in the same industry, which are forecast to grow their revenue 14% annually. It seems obvious that, while the growth outlook is brighter than the recent past, the analysts also expect Recursion Pharmaceuticals to grow faster than the wider industry.

The Bottom Line

The highlight for us was that the consensus reduced its estimated losses next year, perhaps suggesting Recursion Pharmaceuticals is moving incrementally towards profitability. They also upgraded their revenue estimates for next year, and sales are expected to grow faster than the wider market. Some investors might be disappointed to see that the price target is unchanged, but we feel that improving fundamentals are usually a positive - assuming these forecasts are met! So Recursion Pharmaceuticals could be a good candidate for more research.

Analysts are clearly in love with Recursion Pharmaceuticals at the moment, but before diving in - you should be aware that we've identified some warning flags with the business, such as dilutive stock issuance over the past year. For more information, you can click through to our platform to learn more about this and the 3 other concerns we've identified .

Another way to search for interesting companies that could be reaching an inflection point is to track whether management are buying or selling, with our free list of growing companies that insiders are buying.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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.

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