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ObsEva SA (NASDAQ:OBSV) shareholders will have a reason to smile today, with the analysts making substantial upgrades to this year's forecasts. The consensus estimated revenue numbers rose, with their view now clearly much more bullish on the company's business prospects. The market may be pricing in some blue sky too, with the share price gaining 43% to US$3.36 in the last 7 days. We'll be curious to see if these new estimates convince the market to lift the stock price higher still.
Following the latest upgrade, the seven analysts covering ObsEva provided consensus estimates of US$8.4k revenue in 2020, which would reflect a sizeable 44% decline on its sales over the past 12 months. Losses are predicted to fall substantially, shrinking 28% to US$1.70. Yet before this consensus update, the analysts had been forecasting revenues of US$7.5k and losses of US$1.77 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.
The consensus price target fell 6.0%, to US$15.75, suggesting that the analysts remain pessimistic on the company, 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. There are some variant perceptions on ObsEva, with the most bullish analyst valuing it at US$36.00 and the most bearish at US$4.00 per share. 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.
Of course, another way to look at these forecasts is to place them into context against the industry itself. These estimates imply that sales are expected to slow, with a forecast revenue decline of 44%, a significant reduction from annual growth of 14% over the last three years. By contrast, our data suggests that other companies (with analyst coverage) in the same industry are forecast to see their revenue grow 22% annually for the foreseeable future. So although its revenues are forecast to shrink, this cloud does not come with a silver lining - ObsEva is expected to lag the wider industry.
The Bottom Line
The most important thing here is that analysts reduced their loss per share estimates for this year, reflecting increased optimism around ObsEva'sprospects. Pleasantly, analysts also upgraded their revenue estimates, and their forecasts suggest the business is expected to grow slower 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 ObsEva's future valuation. Given that analysts appear to be expecting substantial improvement in the sales pipeline, now could be the right time to take another look at ObsEva.
Analysts are clearly in love with ObsEva 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. You can learn more, and discover the 3 other warning signs we've identified, for free on our platform here.
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.
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