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Time To Worry? Analysts Are Downgrading Their Relay Therapeutics, Inc. (NASDAQ:RLAY) Outlook

Simply Wall St
·2 min read

The analysts covering Relay Therapeutics, Inc. (NASDAQ:RLAY) delivered a dose of negativity to shareholders today, by making a substantial revision to their statutory forecasts for this year. Both revenue and earnings per share (EPS) estimates were cut sharply as the analysts factored in the latest outlook for the business, concluding that they were too optimistic previously.

Following the latest downgrade, the seven analysts covering Relay Therapeutics provided consensus estimates of US$5.1m revenue in 2021, which would reflect a disturbing 94% decline on its sales over the past 12 months. Losses are predicted to fall substantially, shrinking 20% to US$3.85. Yet before this consensus update, the analysts had been forecasting revenues of US$9.9m and losses of US$1.86 per share in 2021. 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.

View our latest analysis for Relay Therapeutics

earnings-and-revenue-growth
earnings-and-revenue-growth

There was no major change to the consensus price target of US$54.33, signalling that the business is performing roughly in line with expectations, despite lower earnings per share forecasts. 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. The most optimistic Relay Therapeutics analyst has a price target of US$62.00 per share, while the most pessimistic values it at US$50.00. Even so, with a relatively close grouping of estimates, it looks like the analysts are quite confident in their valuations, suggesting Relay Therapeutics is an easy business to forecast or the underlying assumptions are obvious.

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 Relay Therapeutics. The lack of change in the price target is puzzling in light of the downgrade but, with a serious decline expected this year, we wouldn't be surprised if investors were a bit wary of Relay Therapeutics.

With that said, the long-term trajectory of the company's earnings is a lot more important than next year. We have estimates - from multiple Relay Therapeutics analysts - going out to 2023, 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.

This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. 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.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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