Time To Worry? Analysts Just Downgraded Their Reata Pharmaceuticals, Inc. (NASDAQ:RETA) Outlook
Today is shaping up negative for Reata Pharmaceuticals, Inc. (NASDAQ:RETA) shareholders, with the analysts delivering a substantial negative revision to this year's forecasts. There was a fairly draconian cut to their revenue estimates, perhaps an implicit admission that previous forecasts were much too optimistic.
Following the latest downgrade, the current consensus, from the eight analysts covering Reata Pharmaceuticals, is for revenues of US$3.2m in 2022, which would reflect a concerning 68% reduction in Reata Pharmaceuticals' sales over the past 12 months. Losses are forecast to hold steady at around US$8.43. However, before this estimates update, the consensus had been expecting revenues of US$4.3m and US$8.39 per share in losses. So there's definitely been a change in sentiment in this update, with the analysts administering a substantial haircut to this year's revenue estimates, while at the same time holding losses per share steady.
See our latest analysis for Reata Pharmaceuticals
the analysts have cut their price target 11% to US$50.67 per share, signalling that the declining revenue and ongoing losses are contributing to the lower 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. Currently, the most bullish analyst values Reata Pharmaceuticals at US$76.00 per share, while the most bearish prices it at US$27.00. This is a fairly broad spread of estimates, suggesting that the analysts are forecasting a wide range of possible outcomes for the business.
One way to get more context on these forecasts is to look at how they compare to both past performance, and how other companies in the same industry are performing. Over the past five years, revenues have declined around 40% annually. Worse, forecasts are essentially predicting the decline to accelerate, with the estimate for an annualised 90% decline in revenue until the end of 2022. By contrast, our data suggests that other companies (with analyst coverage) in a similar industry are forecast to see their revenue grow 3.5% per year. So it's pretty clear that, while it does have declining revenues, the analysts also expect Reata Pharmaceuticals to suffer worse than the wider industry.
The Bottom Line
Regrettably, they also downgraded their revenue estimates, and the latest forecasts imply the business will grow sales slower than the wider market. Furthermore, there was a cut to the price target, suggesting that the latest news has led to more pessimism about the intrinsic value of the business. Overall, given the drastic downgrade to this year's forecasts, we'd be feeling a little more wary of Reata Pharmaceuticals going forwards.
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 Reata Pharmaceuticals 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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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.
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