The analysts might have been a bit too bullish on Ionis Pharmaceuticals, Inc. (NASDAQ:IONS), given that the company fell short of expectations when it released its third-quarter results last week. It definitely looks like a negative result overall with revenues falling 12% short of analyst estimates at US$160m. Statutory losses were US$0.22 per share, 125% bigger than what the analysts expected. Following the result, the analysts have updated their earnings model, and it would be good to know whether they think there's been a strong change in the company's prospects, or if it's business as usual. With this in mind, we've gathered the latest statutory forecasts to see what the analysts are expecting for next year.
Taking into account the latest results, the current consensus, from the 19 analysts covering Ionis Pharmaceuticals, is for revenues of US$801.3m in 2021, which would reflect a considerable 14% reduction in Ionis Pharmaceuticals' sales over the past 12 months. The company is forecast to report a statutory loss of US$0.47 in 2021, a sharp decline from a profit over the last year. Before this earnings announcement, the analysts had been modelling revenues of US$839.5m and losses of US$0.31 per share in 2021. So it's pretty clear the analysts have mixed opinions on Ionis Pharmaceuticals after this update; revenues were downgraded and per-share losses expected to increase.
The average price target was broadly unchanged at US$66.30, perhaps implicitly signalling that the weaker earnings outlook is not expected to have a long-term impact on the valuation. 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. The most optimistic Ionis Pharmaceuticals analyst has a price target of US$120 per share, while the most pessimistic values it at US$19.00. So we wouldn't be assigning too much credibility to analyst price targets in this case, because there are clearly some widely different views on what kind of performance this business can generate. With this in mind, we wouldn't rely too heavily the consensus price target, as it is just an average and analysts clearly have some deeply divergent views on the business.
Taking a look at the bigger picture now, one of the ways we can understand these forecasts is to see how they compare to both past performance and industry growth estimates. These estimates imply that sales are expected to slow, with a forecast revenue decline of 14%, a significant reduction from annual growth of 28% over the last five years. By contrast, our data suggests that other companies (with analyst coverage) in the same industry are forecast to see their revenue grow 20% annually for the foreseeable future. So although its revenues are forecast to shrink, this cloud does not come with a silver lining - Ionis Pharmaceuticals is expected to lag the wider industry.
The Bottom Line
The most important thing to note is the forecast of increased losses next year, suggesting all may not be well at Ionis Pharmaceuticals. On the negative side, they also downgraded their revenue estimates, and forecasts imply revenues will perform worse than the wider industry. The consensus price target held steady at US$66.30, with the latest estimates not enough to have an impact on their price targets.
With that in mind, we wouldn't be too quick to come to a conclusion on Ionis Pharmaceuticals. Long-term earnings power is much more important than next year's profits. We have estimates - from multiple Ionis Pharmaceuticals analysts - going out to 2024, and you can see them free on our platform here.
Don't forget that there may still be risks. For instance, we've identified 2 warning signs for Ionis Pharmaceuticals that you should be aware of.
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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