The latest analyst coverage could presage a bad day for REGENXBIO Inc. (NASDAQ:RGNX), with the analysts making across-the-board cuts to their statutory estimates that might leave shareholders a little shell-shocked. Both revenue and earnings per share (EPS) forecasts went under the knife, suggesting the analysts have soured majorly on the business.
Following the latest downgrade, REGENXBIO's six analysts currently expect revenues in 2021 to be US$143m, approximately in line with the last 12 months. Per-share losses are expected to explode, reaching US$3.85 per share. Yet prior to the latest estimates, the analysts had been forecasting revenues of US$160m and losses of US$2.60 per share in 2021. So there's been quite a change-up of views after the recent consensus updates, with the analysts making a serious cut to their revenue forecasts while also expecting losses per share to increase.
The consensus price target was broadly unchanged at US$60.33, perhaps implicitly signalling that the weaker earnings outlook is not expected to have a long-term impact on the valuation. There's another way to think about price targets though, and that's to look at the range of price targets put forward by analysts, because a wide range of estimates could suggest a diverse view on possible outcomes for the business. There are some variant perceptions on REGENXBIO, with the most bullish analyst valuing it at US$100.00 and the most bearish at US$37.00 per share. As you can see the range of estimates is wide, with the lowest valuation coming in at less than half the most bullish estimate, suggesting there are some strongly diverging views on how think this business will perform. With this in mind, we wouldn't rely too heavily on the consensus price target, as it is just an average and analysts clearly have some deeply divergent views on the business.
Looking at the bigger picture now, one of the ways we can make sense of these forecasts is to see how they measure up against both past performance and industry growth estimates. These estimates imply that sales are expected to slow, with a forecast revenue decline of 1.3%, a significant reduction from annual growth of 38% over the last five years. By contrast, our data suggests that other companies (with analyst coverage) in the same industry are forecast to see their revenue grow 20% annually for the foreseeable future. It's pretty clear that REGENXBIO's revenues are expected to perform substantially 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 next year, suggesting all may not be well at REGENXBIO. Unfortunately analysts also downgraded their revenue estimates, and industry data suggests that REGENXBIO's revenues are expected to grow slower than the wider market. We're also surprised to see that the price target went unchanged. Still, deteriorating business conditions (assuming accurate forecasts!) can be a leading indicator for the stock price, so we wouldn't blame investors for being more cautious on REGENXBIO after the downgrade.
So things certainly aren't looking great, and you should also know that we've spotted some potential warning signs with REGENXBIO, including dilutive stock issuance over the past year. For more information, you can click here to discover this and the 3 other concerns we've identified.
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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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