Investors in MacroGenics, Inc. (NASDAQ:MGNX) had a good week, as its shares rose 4.4% to close at US$12.01 following the release of its full-year results. Revenues of US$64m crushed expectations, although expenses increased commensurately, with statutory losses hitting US$3.16 per share, -11% above what analysts expected. This is an important time for investors, as they can track a company's performance in its report, look at what top analysts are forecasting for next year, and see if there has been any change to expectations for the business. We've gathered the most recent statutory forecasts to see whether analysts have changed their earnings models, following these results.
Taking into account the latest results, the current consensus, from the eleven analysts covering MacroGenics, is for revenues of US$53.6m in 2020, which would reflect an uncomfortable 17% reduction in MacroGenics's sales over the past 12 months. Losses are expected to be contained, narrowing 11% from last year to US$3.50, on a statutory basis. Yet prior to the latest earnings, analysts had been forecasting revenues of US$65.2m and losses of US$3.60 per share in 2020. There's been a definite change in sentiment after these results, with analysts administering a an uncomfortable to next year's revenue estimates, while at the same time substantially upgrading EPS. It's almost as though the business is forecast to reduce its focus on growth to enhance profitability.
There was no major change to the US$20.70 average analyst price target, suggesting that the adjustments to revenue and earnings are not expected to have a long-term impact on the business. Fixating on a single price target can be unwise though, since the consensus target is effectively the average of analyst price targets. As a result, some investors like to look at the range of estimates to see if there are any diverging opinions on the company's valuation. The most optimistic MacroGenics analyst has a price target of US$50.00 per share, while the most pessimistic values it at US$6.00. 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. As a result it might not be possible to derive much meaning from the consensus price target, which is after all just an average of this wide range of estimates.
Zooming out to look at the bigger picture now, one of the ways we can make sense of these forecasts is to see how they measure up both against past performance, and against industry growth estimates. We would highlight that sales are expected to reverse, with the forecast 17% revenue decline a notable change from historical growth of 1.4% over the last five years. By contrast, our data suggests that other companies (with analyst coverage) in the same market are forecast to see their revenue grow 17% annually for the foreseeable future. It's pretty clear that MacroGenics's revenues are expected to perform substantially worse than the wider market.
The Bottom Line
The most important thing to take away is that analysts increased their loss per share estimates for next year. Unfortunately, analysts also downgraded their revenue estimates, and our data indicates revenues are expected to perform worse than the wider market. Even so, earnings per share are more important to the intrinsic value of the business. Even so, earnings are more important to the intrinsic value of the business. 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 said, the long-term trajectory of the company's earnings is a lot more important than next year. We have forecasts for MacroGenics going out to 2024, and you can see them free on our platform here.
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