Shareholders in MacroGenics, Inc. (NASDAQ:MGNX) may be thrilled to learn that the analysts have just delivered a major upgrade to their near-term forecasts. The revenue forecast for this year has experienced a facelift, with analysts now much more optimistic on its sales pipeline.
Following the upgrade, the consensus from eight analysts covering MacroGenics is for revenues of US$60m in 2020, implying a disturbing 23% decline in sales compared to the last 12 months. Per-share losses are expected to creep up to US$3.63. Yet before this consensus update, the analysts had been forecasting revenues of US$54m and losses of US$3.44 per share in 2020. Ergo, there's been a clear change in sentiment, with the analysts lifting this year's revenue estimates, while at the same time increasing their loss per share forecasts to reflect the cost of achieving this growth.
The consensus price target stayed unchanged at US$28.50, seeming to suggest that higher forecast losses are not expected to have a long term impact on the valuation. That's not the only conclusion we can draw from this data however, as some investors also like to consider the spread in estimates when evaluating analyst price targets. There are some variant perceptions on MacroGenics, with the most bullish analyst valuing it at US$40.00 and the most bearish at US$8.00 per share. With such a wide range in price targets, the analysts are almost certainly betting on widely diverse outcomes for the underlying business. 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.
Another way we can view these estimates is in the context of the bigger picture, such as how the forecasts stack up against past performance, and whether forecasts are more or less bullish relative to other companies in the industry. One more thing stood out to us about these estimates, and it's the idea that MacroGenics'decline is expected to accelerate, with revenues forecast to fall 23% next year, topping off a historical decline of 2.4% a year over the past five years. Compare this against analyst estimates for companies in the wider industry, which suggest that revenues (in aggregate) are expected to grow 24% next year. So while a broad number of companies are forecast to grow, unfortunately MacroGenics is expected to see its sales affected worse than other companies in the industry.
The Bottom Line
The most important thing to note from this downgrade is that the consensus increased its forecast losses this year, suggesting all may not be well at MacroGenics. Fortunately, they also upgraded their revenue estimates, and are forecasting revenues to grow slower than the wider market. Given that analysts appear to be expecting substantial improvement in the sales pipeline, now could be the right time to take another look at MacroGenics.
With that said, the long-term trajectory of the company's earnings is a lot more important than next year. At Simply Wall St, we have a full range of analyst estimates for MacroGenics going out to 2024, and you can see them 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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