Shareholders in Xenon Pharmaceuticals Inc. (NASDAQ:XENE) may be thrilled to learn that the analysts have just delivered a major upgrade to their near-term forecasts. The analysts greatly increased their revenue estimates, suggesting a stark improvement in business fundamentals.
After this upgrade, Xenon Pharmaceuticals' five analysts are now forecasting revenues of US$34m in 2020. This would be a sizeable 142% improvement in sales compared to the last 12 months. Losses are predicted to fall substantially, shrinking 33% to US$0.87. Yet prior to the latest estimates, the analysts had been forecasting revenues of US$30m and losses of US$0.98 per share in 2020. So there's been quite a change-up of views after the recent consensus updates, with the analysts making a sizeable increase to their revenue forecasts while also reducing the estimated loss as the business grows towards breakeven.
It will come as no surprise to learn that the analysts have increased their price target for Xenon Pharmaceuticals 5.1% to US$23.83 on the back of these upgrades. 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. The most optimistic Xenon Pharmaceuticals analyst has a price target of US$25.00 per share, while the most pessimistic values it at US$23.00. The narrow spread of estimates could suggest that the business' future is relatively easy to value, or that the analysts have a clear view on its prospects.
Taking a look at the bigger picture now, one of the ways we can understand these forecasts is to see how they compare to both past performance and industry growth estimates. One thing stands out from these estimates, which is that Xenon Pharmaceuticals is forecast to grow faster in the future than it has in the past, with revenues expected to grow 142%. If achieved, this would be a much better result than the 42% annual decline over the past five years. By contrast, our data suggests that other companies (with analyst coverage) in the industry are forecast to see their revenue grow 24% per year. Not only are Xenon Pharmaceuticals' revenues expected to improve, it seems that the analysts are also expecting it to grow faster than the wider industry.
The Bottom Line
The highlight for us was that the consensus reduced its estimated losses this year, perhaps suggesting Xenon Pharmaceuticals is moving incrementally towards profitability. They also upgraded their revenue estimates for this year, and sales are expected to grow faster than the wider market. With a serious upgrade to expectations and a rising price target, it might be time to take another look at Xenon Pharmaceuticals.
Analysts are definitely bullish on Xenon Pharmaceuticals, but no company is perfect. Indeed, you should know that there are several potential concerns to be aware of, including dilutive stock issuance over the past year. For more information, you can click through to our platform to learn more about this and the 3 other risks we've identified .
Of course, seeing company management invest large sums of money in a stock can be just as useful as knowing whether analysts are upgrading their estimates. So you may also wish to search this free list of stocks that insiders are buying.
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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. Thank you for reading.