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One thing we could say about the analysts on Mirati Therapeutics, Inc. (NASDAQ:MRTX) - they aren't optimistic, having just made a major negative revision to their near-term (statutory) forecasts for the organization. This report focused on revenue estimates, and it looks as though the consensus view of the business has become substantially more conservative. Shares are up 9.4% to US$202 in the past week. We'd be curious to see if the downgrade is enough to reverse investor sentiment on the business.
Following the latest downgrade, the current consensus, from the eleven analysts covering Mirati Therapeutics, is for revenues of US$734k in 2020, which would reflect a substantial 59% reduction in Mirati Therapeutics' sales over the past 12 months. Losses are expected to increase substantially, hitting US$8.23 per share. Yet before this consensus update, the analysts had been forecasting revenues of US$843k and losses of US$8.29 per share in 2020. So there's definitely been a change in sentiment in this update, with the analysts administering a substantial haircut to this year's revenue estimates, while at the same time holding losses per share steady.
Analysts lifted their price target 30% to US$214 per share, with reduced revenue estimates seemingly not expected to have a long-term impact on the intrinsic value of the business. The consensus price target is just an average of individual analyst targets, so - it could be handy to see how wide the range of underlying estimates is. The most optimistic Mirati Therapeutics analyst has a price target of US$267 per share, while the most pessimistic values it at US$143. Analysts definitely have varying views on the business, but the spread of estimates is not wide enough in our view to suggest that extreme outcomes could await Mirati Therapeutics shareholders.
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 that stands out from these estimates is that revenues are expected to keep falling, roughly in line with the historical decline of 66% per annum over the past year. Compare this with our data on other companies (with analyst coverage) in the industry, which in aggregate are forecast to see their revenue grow 21% next year. So it looks like Mirati Therapeutics' revenues are expected to decline at a slower rate than the wider industry.
The Bottom Line
Unfortunately analysts also downgraded their revenue estimates, and industry data suggests that Mirati Therapeutics' revenues are expected to grow slower than the wider market. There was also an increase in the price target, suggesting that there is more optimism baked into the forecasts than there was previously. Overall, given the drastic downgrade to this year's forecasts, we'd be feeling a little more wary of Mirati Therapeutics going forwards.
With that said, the long-term trajectory of the company's earnings is a lot more important than next year. We have estimates - from multiple Mirati Therapeutics analysts - going out to 2024, 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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