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The latest analyst coverage could presage a bad day for Catalyst Pharmaceuticals, Inc. (NASDAQ:CPRX), with the analysts making across-the-board cuts to their statutory estimates that might leave shareholders a little shell-shocked. 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$3.40, shares are up 7.9% 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 current consensus from Catalyst Pharmaceuticals' five analysts is for revenues of US$138m in 2021 which - if met - would reflect a solid 17% increase on its sales over the past 12 months. Before the latest update, the analysts were foreseeing US$154m of revenue in 2021. It looks like forecasts have become a fair bit less optimistic on Catalyst Pharmaceuticals, given the substantial drop in revenue estimates.
We'd point out that there was no major changes to their price target of US$7.40, suggesting the latest estimates were not enough to shift their view on the value of the business. 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. Currently, the most bullish analyst values Catalyst Pharmaceuticals at US$9.00 per share, while the most bearish prices it at US$5.50. There are definitely some different views on the stock, but the range of estimates is not wide enough as to imply that the situation is unforecastable, in our view.
These estimates are interesting, but it can be useful to paint some more broad strokes when seeing how forecasts compare, both to the Catalyst Pharmaceuticals' past performance and to peers in the same industry. We would highlight that Catalyst Pharmaceuticals' revenue growth is expected to slow, with forecast 17% increase next year well below the historical 62% growth over the last year. Compare this against other companies (with analyst forecasts) in the industry, which are in aggregate expected to see revenue growth of 21% next year. Factoring in the forecast slowdown in growth, it seems obvious that Catalyst Pharmaceuticals is also expected to grow slower than other industry participants.
The Bottom Line
The clear low-light was that analysts slashing their revenue forecasts for Catalyst Pharmaceuticals next year. They also expect company revenue to perform worse than the wider market. Given the stark change in sentiment, we'd understand if investors became more cautious on Catalyst Pharmaceuticals after today.
After a downgrade like this, it's pretty clear that previous forecasts were too optimistic. What's more, we've spotted several possible issues with Catalyst Pharmaceuticals' business, like concerns around earnings quality. Learn more, and discover the 1 other concern we've identified, for free on our platform here.
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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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