It's been a mediocre week for La Jolla Pharmaceutical Company (NASDAQ:LJPC) shareholders, with the stock dropping 12% to US$6.05 in the week since its latest third-quarter results. Revenues of US$5.7m fell short of estimates by 18%, but earnings came in 1.5% ahead of schedule, at US$1.08 per share. Analysts typically update their forecasts at each earnings report, and we can judge from their estimates whether their view of the company has changed or if there are any new concerns to be aware of. So we collected the latest post-earnings consensus estimates to see what could be in store for next year.
Taking into account the latest results, the latest consensus from La Jolla Pharmaceutical's five analysts is for revenues of US$61.8m in 2020, which would reflect a substantial 209% improvement in sales compared to the last 12 months. Losses are forecast to balloon 44% to US$2.84 per share. Before this earnings announcement, analysts had been forecasting revenues of US$65.9m and losses of US$2.51 per share in 2020. From this we can that analyst sentiment has definitely become more bearish after the latest results, leading to lower revenue forecasts and a real cut to earnings per share estimates.
There was no major change to the consensus price target of US$20.17, signalling that the business is performing roughly in line with expectations, despite lower earnings per share forecasts. 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. There are some variant perceptions on La Jolla Pharmaceutical, with the most bullish analyst valuing it at US$27.00 and the most bearish at US$7.00 per share. This is a fairly broad spread of estimates, suggesting that analysts are forecasting a wide range of possible outcomes for the business.
In addition, we can look to La Jolla Pharmaceutical's past performance and see whether business is expected to improve, and if the company is expected to perform better than wider market. Analysts are definitely expecting La Jolla Pharmaceutical's growth to accelerate, with the forecast 209% growth ranking favourably alongside historical growth of 106% per annum over the past three years. Compare this with other companies in the same market, which are forecast to grow their revenue 18% next year. Factoring in the forecast acceleration in revenue, it's pretty clear that La Jolla Pharmaceutical is expected to grow much faster than its market.
The Bottom Line
The highlight for us was that the consensus reduced its estimated losses next year, perhaps suggesting La Jolla Pharmaceutical is moving incrementally towards profitability. Unfortunately analysts also downgraded their revenue estimates, although industry data suggests that La Jolla Pharmaceutical's revenues are expected to grow faster than the wider market. There was no real change to the consensus price target, suggesting that the intrinsic value of the business has not undergone any major changes with the latest estimates.
With that in mind, we wouldn't be too quick to come to a conclusion on La Jolla Pharmaceutical. Long-term earnings power is much more important than next year's profits. At Simply Wall St, we have a full range of analyst estimates for La Jolla Pharmaceutical going out to 2023, and you can see them free on our platform here..
It might also be worth considering whether La Jolla Pharmaceutical's debt load is appropriate, using our debt analysis tools on the Simply Wall St platform, here.
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