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The latest analyst coverage could presage a bad day for Progenity, Inc. (NASDAQ:PROG), with the analysts making across-the-board cuts to their statutory estimates that might leave shareholders a little shell-shocked. Revenue and earnings per share (EPS) forecasts were both revised downwards, with analysts seeing grey clouds on the horizon.
Following the downgrade, the current consensus from Progenity's five analysts is for revenues of US$146m in 2021 which - if met - would reflect a sizeable 99% increase on its sales over the past 12 months. The loss per share is anticipated to greatly reduce in the near future, narrowing 92% to US$3.37. Yet prior to the latest estimates, the analysts had been forecasting revenues of US$180m and losses of US$2.82 per share in 2021. Ergo, there's been a clear change in sentiment, with the analysts administering a notable cut to next year's revenue estimates, while at the same time increasing their loss per share forecasts.
The consensus price target fell 13% to US$11.60, implicitly signalling that lower earnings per share are a leading indicator for Progenity's valuation. The consensus price target is just an average of individual analyst targets, so - it could be handy to see how wide the range of underlying estimates is. There are some variant perceptions on Progenity, with the most bullish analyst valuing it at US$15.00 and the most bearish at US$10.00 per share. Analysts definitely have varying views on the business, but the spread of estimates is not wide enough in our view to suggest that extreme outcomes could await Progenity shareholders.
Of course, another way to look at these forecasts is to place them into context against the industry itself. For example, we noticed that Progenity's rate of growth is expected to accelerate meaningfully, with revenues forecast to grow 99%, well above its historical decline of 40% a year over the past year. By contrast, our data suggests that other companies (with analyst coverage) in the industry are forecast to see their revenue grow 7.0% per year. So it looks like Progenity is expected to grow faster than its competitors, at least for a while.
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 Progenity. While analysts did downgrade their revenue estimates, these forecasts still imply revenues will perform better than the wider market. With a serious cut to next year's expectations and a falling price target, we wouldn't be surprised if investors were becoming wary of Progenity.
There might be good reason for analyst bearishness towards Progenity, like a short cash runway. Learn more, and discover the 2 other risks we've identified, for free on our platform here.
Of course, seeing company management invest large sums of money in a stock can be just as useful as knowing whether analysts are downgrading their estimates. So you may also wish to search this free list of stocks that insiders are buying.
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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