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Today is shaping up negative for Protagonist Therapeutics, Inc. (NASDAQ:PTGX) shareholders, with the analysts delivering a substantial negative revision to this year's forecasts. Both revenue and earnings per share (EPS) forecasts went under the knife, suggesting analysts have soured majorly on the business.
Following the downgrade, the consensus from seven analysts covering Protagonist Therapeutics is for revenues of US$15m in 2021, implying a disturbing 44% decline in sales compared to the last 12 months. Per-share losses are expected to explode, reaching US$2.52 per share. Yet before this consensus update, the analysts had been forecasting revenues of US$19m and losses of US$2.28 per share in 2021. Ergo, there's been a clear change in sentiment, with the analysts administering a notable cut to this year's revenue estimates, while at the same time increasing their loss per share forecasts.
Analysts lifted their price target 11% to US$61.43, implicitly signalling that lower earnings per share are not expected to have a longer-term impact on the stock's value. 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. There are some variant perceptions on Protagonist Therapeutics, with the most bullish analyst valuing it at US$93.00 and the most bearish at US$50.00 per share. This is a fairly broad spread of estimates, suggesting that the analysts are forecasting a wide range of possible outcomes for the business.
These estimates are interesting, but it can be useful to paint some more broad strokes when seeing how forecasts compare, both to the Protagonist Therapeutics' past performance and to peers in the same industry. Over the past three years, revenues have declined around 11% annually. Worse, forecasts are essentially predicting the decline to accelerate, with the estimate for an annualised 69% decline in revenue until the end of 2021. Compare this against analyst estimates for companies in the broader industry, which suggest that revenues (in aggregate) are expected to grow 9.2% annually. So it's pretty clear that, while it does have declining revenues, the analysts also expect Protagonist Therapeutics to suffer worse than the wider 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 Protagonist Therapeutics. Regrettably, they also downgraded their revenue estimates, and the latest forecasts imply the business will grow sales slower than the wider market. The rising price target is a puzzle, but still - with a serious cut to this year's outlook, we wouldn't be surprised if investors were a bit wary of Protagonist Therapeutics.
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 Protagonist Therapeutics going out to 2023, and you can see them free on our platform here.
Of course, seeing company management invest large sums of money in a stock can be just as useful as knowing whether analysts are downgrading their estimates. So you may also wish to search this free list of stocks that insiders are buying.
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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