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Industry Analysts Just Made A Massive Upgrade To Their Denali Therapeutics Inc. (NASDAQ:DNLI) Revenue Forecasts

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Simply Wall St
·4 min read
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Shareholders in Denali Therapeutics Inc. (NASDAQ:DNLI) may be thrilled to learn that the analysts have just delivered a major upgrade to their near-term forecasts. The analysts have sharply increased their revenue numbers, with a view that Denali Therapeutics will make substantially more sales than they'd previously expected. Investors have been pretty optimistic on Denali Therapeutics too, with the stock up 29% to US$69.94 over the past week. It will be interesting to see if today's upgrade is enough to propel the stock even higher.

After the upgrade, the nine analysts covering Denali Therapeutics are now predicting revenues of US$71m in 2021. If met, this would reflect a huge 201% improvement in sales compared to the last 12 months. Losses are forecast to narrow 4.6% to US$2.11 per share. However, before this estimates update, the consensus had been expecting revenues of US$40m and US$2.21 per share in losses. 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.

Check out our latest analysis for Denali Therapeutics

earnings-and-revenue-growth
earnings-and-revenue-growth

The consensus price target rose 47% to US$61.44, with the analysts encouraged by the higher revenue and lower forecast losses for next year. It could also be instructive to look at the range of analyst estimates, to evaluate how different the outlier opinions are from the mean. The most optimistic Denali Therapeutics analyst has a price target of US$81.00 per share, while the most pessimistic values it at US$18.00. 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.

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. One thing stands out from these estimates, which is that Denali Therapeutics is forecast to grow faster in the future than it has in the past, with revenues expected to grow 201%. If achieved, this would be a much better result than the 84% annual decline over the past year. By contrast, our data suggests that other companies (with analyst coverage) in the industry are forecast to see their revenue grow 21% per year. So it looks like Denali Therapeutics is expected to grow faster than its competitors, at least for a while.

The Bottom Line

The highlight for us was that the consensus reduced its estimated losses next year, perhaps suggesting Denali Therapeutics 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. There was also a nice increase in the price target, with analysts apparently feeling that the intrinsic value of the business is improving. Given that analysts appear to be expecting substantial improvement in the sales pipeline, now could be the right time to take another look at Denali Therapeutics.

Analysts are clearly in love with Denali Therapeutics 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 4 other risks 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.

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.

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