It's been a sad week for Nektar Therapeutics (NASDAQ:NKTR), who've watched their investment drop 12% to US$20.81 in the week since the company reported its full-year result. It looks like a positive result overall, with revenues of US$115m beating forecasts by 6.1%. Statutory losses of US$2.52 per share were roughly in line with what analysts had forecast. 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 statutory consensus estimates to see what could be in store for next year.
Taking into account the latest results, the latest consensus from Nektar Therapeutics's 13 analysts is for revenues of US$144.3m in 2020, which would reflect a huge 26% improvement in sales compared to the last 12 months. Statutory losses are forecast to narrow 7.1% to US$2.70 per share. Before this earnings announcement, analysts had been forecasting revenues of US$165.3m and losses of US$2.42 per share in 2020. It looks like analyst sentiment has declined substantially in the aftermath of these results, with a substantial drop in revenue estimates and a substantial drop in consensus earnings per share numbers as well.
The average analyst price target fell 5.2% to US$30.60, implicitly signalling that lower earnings per share are a leading indicator for Nektar Therapeutics's valuation. It could also be instructive to look at the range of analyst estimates, to evaluate how different the outlier opinions are from the mean. Currently, the most bullish analyst values Nektar Therapeutics at US$80.00 per share, while the most bearish prices it at US$18.00. We would probably assign less value to the analyst forecasts in this situation, because such a wide range of estimates could imply that the future of this business is difficult to value accurately. 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. Next year brings more of the same, according to analysts, with revenue forecast to grow 26%, in line with its 26% annual growth over the past five years. By contrast, our data suggests that other companies (with analyst coverage) in a similar industry are forecast to see their revenues grow 5.2% per year. So although Nektar Therapeutics is expected to maintain its revenue growth rate, it's definitely expected to grow faster than the wider market.
The Bottom Line
The highlight for us was that the consensus reduced its estimated losses next year, perhaps suggesting Nektar Therapeutics is moving incrementally towards profitability. Unfortunately analysts also downgraded their revenue estimates, although industry data suggests that Nektar Therapeutics's revenues are expected to grow faster than the wider market. Analysts also downgraded their price target, suggesting that the latest news has led analysts to become more pessimistic about the intrinsic value of the business.
With that in mind, we wouldn't be too quick to come to a conclusion on Nektar Therapeutics. Long-term earnings power is much more important than next year's profits. We have estimates - from multiple Nektar Therapeutics analysts - going out to 2024, and you can see them free on our platform here.
Another thing to consider is whether management and directors have been buying or selling stock recently. We provide an overview of all open market stock trades for the last twelve months on our platform, here.
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