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Market forces rained on the parade of Karyopharm Therapeutics Inc. (NASDAQ:KPTI) shareholders today, when the analysts downgraded their forecasts for this year. Both revenue and earnings per share (EPS) forecasts went under the knife, suggesting analysts have soured majorly on the business.
Following the downgrade, the current consensus from Karyopharm Therapeutics' eight analysts is for revenues of US$103m in 2020 which - if met - would reflect a sizeable 152% increase on its sales over the past 12 months. Losses are predicted to fall substantially, shrinking 22% to US$2.50. Yet before this consensus update, the analysts had been forecasting revenues of US$115m and losses of US$2.26 per share in 2020. Ergo, there's been a clear change in sentiment, with the analysts administering a notable cut to this year's revenue estimates, while at the same time increasing their loss per share forecasts.
There was no major change to the consensus price target of US$31.78, signalling that the business is performing roughly in line with expectations, despite lower earnings per share forecasts. It could also be instructive to look at the range of analyst estimates, to evaluate how different the outlier opinions are from the mean. Currently, the most bullish analyst values Karyopharm Therapeutics at US$43.00 per share, while the most bearish prices it at US$25.00. These price targets show that analysts do have some differing views on the business, but the estimates do not vary enough to suggest to us that some are betting on wild success or utter failure.
Another way we can view these estimates is in the context of the bigger picture, such as how the forecasts stack up against past performance, and whether forecasts are more or less bullish relative to other companies in the industry. The analysts are definitely expecting Karyopharm Therapeutics'growth to accelerate, with the forecast 152% growth ranking favourably alongside historical growth of 72% per annum over the past five years. Compare this with other companies in the same industry, which are forecast to grow their revenue 18% next year. It seems obvious that, while the growth outlook is brighter than the recent past, the analysts also expect Karyopharm Therapeutics to grow faster than the wider industry.
The Bottom Line
The most important thing to take away is that analysts increased their loss per share estimates for this year. Unfortunately, analysts also downgraded their revenue estimates, although our data indicates revenues are expected to perform better 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 Karyopharm Therapeutics after the downgrade.
Still, the long-term prospects of the business are much more relevant than next year's earnings. We have estimates - from multiple Karyopharm Therapeutics analysts - going out to 2024, and you can see them free on our platform here.
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.
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