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Investors in Morphic Holding, Inc. (NASDAQ:MORF) had a good week, as its shares rose 5.4% to close at US$28.09 following the release of its third-quarter results. In addition to smashing expectations with revenues of US$26m, Morphic Holding delivered a surprise statutory profit of US$0.17 per share, a notable improvement compared to analyst expectations of a loss. Earnings are an important time for investors, as they can track a company's performance, look at what the analysts are forecasting for next year, and see if there's been a change in sentiment towards the company. We've gathered the most recent statutory forecasts to see whether the analysts have changed their earnings models, following these results.
Following the recent earnings report, the consensus from five analysts covering Morphic Holding is for revenues of US$35.9m in 2021, implying a perceptible 7.4% decline in sales compared to the last 12 months. Per-share losses are expected to explode, reaching US$2.31 per share. Yet prior to the latest earnings, the analysts had been forecasting revenues of US$35.6m and losses of US$2.30 per share in 2021.
The consensus price target was unchanged at US$35.00, suggesting that the business - losses and all - is executing in line with estimates. 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. The most optimistic Morphic Holding analyst has a price target of US$40.00 per share, while the most pessimistic values it at US$31.00. With such a narrow range of valuations, the analysts apparently share similar views on what they think the business is worth.
Taking a look at the bigger picture now, one of the ways we can understand these forecasts is to see how they compare to both past performance and industry growth estimates. We would highlight that sales are expected to reverse, with the forecast 7.4% revenue decline a notable change from historical growth of 88% over the last year. 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. So although its revenues are forecast to shrink, this cloud does not come with a silver lining - Morphic Holding is expected to lag the wider industry.
The Bottom Line
The most important thing to take away is that the analysts reconfirmed their loss per share estimates for next year. Fortunately, the analysts also reconfirmed their revenue estimates, suggesting sales are tracking in line with expectations - although our data does suggest that Morphic Holding's revenues are expected to perform worse than the wider industry. There was no real change to the consensus price target, suggesting that the intrinsic value of the business has not undergone any major changes with the latest estimates.
With that in mind, we wouldn't be too quick to come to a conclusion on Morphic Holding. Long-term earnings power is much more important than next year's profits. We have forecasts for Morphic Holding going out to 2024, and you can see them free on our platform here.
Don't forget that there may still be risks. For instance, we've identified 3 warning signs for Morphic Holding (1 is 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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