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Today is shaping up negative for XOMA Corporation (NASDAQ:XOMA) shareholders, with the analysts delivering a substantial negative revision to this year's forecasts. Both revenue and earnings per share (EPS) estimates were cut sharply as analysts factored in the latest outlook for the business, concluding that they were too optimistic previously.
Following the latest downgrade, the current consensus, from the three analysts covering XOMA, is for revenues of US$9.3m in 2020, which would reflect a considerable 16% reduction in XOMA's sales over the past 12 months. Losses are supposed to balloon 65% to US$1.58 per share. However, before this estimates update, the consensus had been expecting revenues of US$13m and US$0.81 per share in losses. 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.
These estimates are interesting, but it can be useful to paint some more broad strokes when seeing how forecasts compare, both to the XOMA's past performance and to peers in the same industry. One thing that stands out from these estimates is that revenues are expected to keep falling, roughly in line with the historical decline of 14% per annum over the past five years. Yet our data suggests that other companies (with analyst coverage) in the industry are expected, in aggregate, to see their revenues rise 22% over the coming year. So it looks like XOMA's revenues are expected to decline at a slower rate than the wider industry.
The Bottom Line
The most important thing to note from this downgrade is that the consensus increased its forecast losses this year, suggesting all may not be well at XOMA. Unfortunately analysts also downgraded their revenue estimates, and industry data suggests that XOMA's revenues are expected to grow slower than the wider market. We wouldn't be surprised to find shareholders feeling a bit shell-shocked, after these downgrades. It looks like analysts have become a lot more bearish on XOMA, and their negativity could be grounds for caution.
Even so, the longer term trajectory of the business is much more important for the value creation of shareholders. We have estimates - from multiple XOMA analysts - going out to 2024, and you can see them 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.
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