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Rainbows and Unicorns: Prothena Corporation plc (NASDAQ:PRTA) Analysts Just Became A Lot More Optimistic

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Prothena Corporation plc (NASDAQ:PRTA) shareholders will have a reason to smile today, with the analysts making substantial upgrades to this year's statutory forecasts. The analysts greatly increased their revenue estimates, suggesting a stark improvement in business fundamentals. Investor sentiment seems to be improving too, with the share price up 7.2% to US$57.98 over the past 7 days. Whether the upgrade is enough to drive the stock price higher is yet to be seen, however.

Following the upgrade, the current consensus from Prothena's five analysts is for revenues of US$209m in 2021 which - if met - would reflect a huge 243% increase on its sales over the past 12 months. The losses are expected to disappear over the next year or so, with forecasts for a profit of US$1.25 per share this year. However, before this estimates update, the consensus had been expecting revenues of US$114m and US$0.74 per share in losses. So we can see that this has sparked a pretty clear upgrade to expectations, with higher revenues anticipated to lead to profit sooner than previously forecast.

See our latest analysis for Prothena

earnings-and-revenue-growth
earnings-and-revenue-growth

Although the analysts have upgraded their earnings estimates, there was no change to the consensus price target of US$70.00, suggesting that the forecast performance does not have a long term impact on the company's valuation. The consensus price target is just an average of individual analyst targets, so - it could be handy to see how wide the range of underlying estimates is. Currently, the most bullish analyst values Prothena at US$82.00 per share, while the most bearish prices it at US$57.00. This shows there is still some diversity in estimates, but analysts don't appear to be totally split on the stock as though it might be a success or failure situation.

Of course, another way to look at these forecasts is to place them into context against the industry itself. 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 9.4% annually. It seems obvious that, while the growth outlook is brighter than the recent past, the analysts also expect Prothena to grow faster than the wider industry.

The Bottom Line

The most important thing to take away from this upgrade is that there is now an expectation for Prothena to become profitable this year, compared to previous expectations of a loss. They also upgraded their revenue estimates for this year, and sales are expected to grow faster than the wider market. Some investors might be disappointed to see that the price target is unchanged, but we feel that improving fundamentals are usually a positive - assuming these forecasts are met! So Prothena could be a good candidate for more research.

These earnings upgrades look like a sterling endorsement, but before diving in - you should know that we've spotted 4 potential concerns with Prothena, including dilutive stock issuance over the past year. You can learn more, and discover the 3 other concerns we've identified, for 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 upgrading 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. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. 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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