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The analysts might have been a bit too bullish on Prothena Corporation plc (NASDAQ:PRTA), given that the company fell short of expectations when it released its quarterly results last week. Unfortunately, Prothena delivered a serious earnings miss. Revenues of US$60m were 18% below expectations, and statutory earnings per share of US$0.58 missed estimates by 34%. This is an important time for investors, as they can track a company's performance in its report, look at what experts 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 the analysts have changed their earnings models, following these results.
Taking into account the latest results, the current consensus from Prothena's four analysts is for revenues of US$210.5m in 2021, which would reflect a major 247% increase on its sales over the past 12 months. Prothena is also expected to turn profitable, with statutory earnings of US$1.26 per share. Before this earnings announcement, the analysts had been modelling revenues of US$114.1m and losses of US$0.74 per share in 2021. It looks like there's been a definite improvement in business conditions, with a revenue upgrade expected to lead to profitability sooner than previously forecast.
It will come as no surprise to learn that the analysts have increased their price target for Prothena 16% to US$70.00on the back of these upgrades. 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. Currently, the most bullish analyst values Prothena at US$76.00 per share, while the most bearish prices it at US$57.00. With such a narrow range of valuations, the analysts apparently share similar views on what they think the business is worth.
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. It's clear from the latest estimates that Prothena's rate of growth is expected to accelerate meaningfully, with the forecast 11x annualised revenue growth to the end of 2021 noticeably faster than its historical growth of 6.2% p.a. over the past five years. Compare this with other companies in the same industry, which are forecast to grow their revenue 10% annually. Factoring in the forecast acceleration in revenue, it's pretty clear that Prothena is expected to grow much faster than its industry.
The Bottom Line
The most important thing to take away is that the analysts now expect Prothena to become profitable next year, compared to previous expectations that it would report a loss. Pleasantly, they also upgraded their revenue estimates, and their forecasts suggest the business is expected to grow faster than the wider industry. There was also a nice increase in the price target, with the analysts clearly feeling that the intrinsic value of the business is improving.
With that said, the long-term trajectory of the company's earnings is a lot more important than next year. We have forecasts for Prothena going out to 2023, and you can see them free on our platform here.
Don't forget that there may still be risks. For instance, we've identified 4 warning signs for Prothena (1 is a bit concerning) you should be aware of.
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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