The analysts covering Kadmon Holdings, Inc. (NASDAQ:KDMN) delivered a dose of negativity to shareholders today, by making a substantial revision to their statutory forecasts for next year. Revenue estimates were cut sharply as the analysts signalled a weaker outlook - perhaps a sign that investors should temper their expectations as well. At US$4.29, shares are up 5.4% in the past 7 days. Investors could be forgiven for changing their mind on the business following the downgrade; but it's not clear if the revised forecasts will lead to selling activity.
Following the downgrade, the latest consensus from Kadmon Holdings' five analysts is for revenues of US$29m in 2021, which would reflect a major 137% improvement in sales compared to the last 12 months. The loss per share is expected to ameliorate slightly, reducing to US$0.55. Yet prior to the latest estimates, the analysts had been forecasting revenues of US$37m and losses of US$0.54 per share in 2021. So there's been quite a change-up of views after the recent consensus updates, with the analysts making a serious cut to their revenue forecasts while also expecting losses per share to increase.
Of course, another way to look at these forecasts is to place them into context against the industry itself. One thing stands out from these estimates, which is that Kadmon Holdings is forecast to grow faster in the future than it has in the past, with revenues expected to grow 137%. If achieved, this would be a much better result than the 48% annual decline over the past five years. Compare this against analyst estimates for the wider industry, which suggest that (in aggregate) industry revenues are expected to grow 20% next year. So it looks like Kadmon Holdings is expected to grow faster than its competitors, at least for a while.
The Bottom Line
The most important thing to note from this downgrade is that the consensus increased its forecast losses next year, suggesting all may not be well at Kadmon Holdings. Unfortunately, analysts also downgraded their revenue estimates, although our data indicates revenues are expected to perform better than the wider market. Often, one downgrade can set off a daisy-chain of cuts, especially if an industry is in decline. So we wouldn't be surprised if the market became a lot more cautious on Kadmon Holdings after today.
Even so, the longer term trajectory of the business is much more important for the value creation of shareholders. We have estimates - from multiple Kadmon Holdings analysts - going out to 2025, 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 downgrading their estimates. So you may also wish to search this free list of stocks 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.
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