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Wave Life Sciences Ltd. (NASDAQ:WVE) Just Reported Third-Quarter Earnings And Analysts Are Lifting Their Estimates

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Simply Wall St
·4 min read
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As you might know, Wave Life Sciences Ltd. (NASDAQ:WVE) last week released its latest third-quarter, and things did not turn out so great for shareholders. Earnings missed the mark badly, with revenues of US$3.5m falling 69% short of expectations. Losses correspondingly increased, with a US$0.86 per-share statutory loss some 18% larger than what the analysts expected. The analysts typically update their forecasts at each earnings report, and we can judge from their estimates whether their view of the company has changed or if there are any new concerns to be aware of. So we collected the latest post-earnings statutory consensus estimates to see what could be in store for next year.

View our latest analysis for Wave Life Sciences

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earnings-and-revenue-growth

Taking into account the latest results, the most recent consensus for Wave Life Sciences from six analysts is for revenues of US$73.8m in 2021 which, if met, would be a substantial 466% increase on its sales over the past 12 months. The loss per share is expected to greatly reduce in the near future, narrowing 68% to US$1.62. Before this latest report, the consensus had been expecting revenues of US$69.2m and US$1.78 per share in losses. So there seems to have been a moderate uplift in analyst sentiment with the latest consensus release, given the upgrades to both revenue and loss per share forecasts for next year.

Despite these upgrades,the analysts have not made any major changes to their price target of US$16.33, implying that their latest estimates don't have a long term impact on what they think the stock is worth. There's another way to think about price targets though, and that's to look at the range of price targets put forward by analysts, because a wide range of estimates could suggest a diverse view on possible outcomes for the business. The most optimistic Wave Life Sciences analyst has a price target of US$27.00 per share, while the most pessimistic values it at US$7.00. With such a wide range in price targets, analysts are almost certainly betting on widely divergent outcomes in the underlying business. With this in mind, we wouldn't rely too heavily the consensus price target, as it is just an average and analysts clearly have some deeply divergent views on the business.

Of course, another way to look at these forecasts is to place them into context against the industry itself. The analysts are definitely expecting Wave Life Sciences' growth to accelerate, with the forecast 5x growth ranking favourably alongside historical growth of 52% per annum over the past five years. Compare this with other companies in the same industry, which are forecast to grow their revenue 6.7% next year. Factoring in the forecast acceleration in revenue, it's pretty clear that Wave Life Sciences is expected to grow much faster than its industry.

The Bottom Line

The most obvious conclusion is that the analysts made no changes to their forecasts for a loss next year. Happily, they also upgraded their revenue estimates, and are forecasting revenues to grow faster than the wider industry. The consensus price target held steady at US$16.33, with the latest estimates not enough to have an impact on their price targets.

Following on from that line of thought, we think that the long-term prospects of the business are much more relevant than next year's earnings. We have forecasts for Wave Life Sciences going out to 2024, and you can see them free on our platform here.

Don't forget that there may still be risks. For instance, we've identified 4 warning signs for Wave Life Sciences (1 makes us a bit uncomfortable) you should be aware of.

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.

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