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The RedHill Biopharma Ltd. (NASDAQ:RDHL) Analyst Just Cut Their Revenue Forecast By 23%

Market forces rained on the parade of RedHill Biopharma Ltd. (NASDAQ:RDHL) shareholders today, when the covering analyst downgraded their forecasts for this year. Revenue estimates were cut sharply as the analyst signalled a weaker outlook - perhaps a sign that investors should temper their expectations as well.

After the downgrade, the consensus from RedHill Biopharma's lone analyst is for revenues of US$68m in 2022, which would reflect a considerable 9.5% decline in sales compared to the last year of performance. The loss per share is anticipated to greatly reduce in the near future, narrowing 95% to US$0.07. Yet before this consensus update, the analyst had been forecasting revenues of US$88m and losses of US$0.07 per share in 2022. So there's definitely been a change in sentiment in this update, with the analyst administering a substantial haircut to this year's revenue estimates, while at the same time holding losses per share steady.

View our latest analysis for RedHill Biopharma

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The consensus price target fell 42% to US$4.50, with the analyst clearly concerned about the weaker revenue outlook and expectation of ongoing losses.

These estimates are interesting, but it can be useful to paint some more broad strokes when seeing how forecasts compare, both to the RedHill Biopharma's past performance and to peers in the same industry. These estimates imply that sales are expected to slow, with a forecast annualised revenue decline of 18% by the end of 2022. This indicates a significant reduction from annual growth of 60% over the last five years. Compare this with our data, which suggests that other companies in the same industry are, in aggregate, expected to see their revenue grow 4.0% per year. It's pretty clear that RedHill Biopharma's revenues are expected to perform substantially worse than the wider industry.

The Bottom Line

Unfortunately the analyst also downgraded their revenue estimates, and industry data suggests that RedHill Biopharma's revenues are expected to grow slower than the wider market. Furthermore, there was a cut to the price target, suggesting that the latest news has led to more pessimism about the intrinsic value of the business. Given the stark change in sentiment, we'd understand if investors became more cautious on RedHill Biopharma after today.

After a downgrade like this, it's pretty clear that previous forecasts were too optimistic. What's more, we've spotted several possible issues with RedHill Biopharma's business, like a short cash runway. For more information, you can click here to discover this and the 3 other risks we've identified.

Another way to search for interesting companies that could be reaching an inflection point is to track whether management are buying or selling, with our free list of growing companies that insiders are buying.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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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