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Celebrations may be in order for RAPT Therapeutics, Inc. (NASDAQ:RAPT) shareholders, with the analysts delivering a significant upgrade to their statutory estimates for the company. The consensus statutory numbers for both revenue and earnings per share (EPS) increased, with their view clearly much more bullish on the company's business prospects.
After the upgrade, the consensus from RAPT Therapeutics' five analysts is for revenues of US$1.9m in 2021, which would reflect a sizeable 48% decline in sales compared to the last year of performance. Losses are expected to increase substantially, hitting US$2.71 per share. However, before this estimates update, the consensus had been expecting revenues of US$1.0m and US$3.08 per share in losses. We can see there's definitely been a change in sentiment in this update, with the analysts administering a sizeable upgrade to next year's revenue estimates, while at the same time reducing their loss estimates.
Yet despite these upgrades, the analysts cut their price target 18% to US$36.17, implicitly signalling that the ongoing losses are likely to weigh negatively on RAPT Therapeutics' valuation. 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. The most optimistic RAPT Therapeutics analyst has a price target of US$51.00 per share, while the most pessimistic values it at US$23.00. Note the wide gap in analyst price targets? This implies to us that there is a fairly broad range of possible scenarios for the underlying business.
The Bottom Line
The most important thing here is that analysts reduced their loss per share estimates for next year, reflecting increased optimism around RAPT Therapeutics' prospects. A lower price target is not intuitively what we would expect from a company whose business prospects are improving - at least judging by these forecasts - but if the underlying fundamentals are strong, RAPT Therapeutics could be one for the watch list.
These earnings upgrades look like a sterling endorsement, but before diving in - you should know that we've spotted 5 potential risks with RAPT Therapeutics, including dilutive stock issuance over the past year. You can learn more, and discover the 4 other risks we've identified, for 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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