Adamas Pharmaceuticals, Inc. (NASDAQ:ADMS) shareholders are probably feeling a little disappointed, since its shares fell 5.7% to US$3.00 in the week after its latest first-quarter results. Results look to have been somewhat negative – revenue fell 6.2% short of analyst estimates at US$14m, although statutory losses were somewhat better. The per-share loss was US$0.59, 28% smaller than the analysts were expecting prior to the result. Following the result, the analysts have updated their earnings model, and it would be good to know whether they think there’s been a strong change in the company’s prospects, or if it’s business as usual. Readers will be glad to know we’ve aggregated the latest statutory forecasts to see whether the analysts have changed their mind on Adamas Pharmaceuticals after the latest results.
After the latest results, the nine analysts covering Adamas Pharmaceuticals are now predicting revenues of US$71.8m in 2020. If met, this would reflect a major 25% improvement in sales compared to the last 12 months. Losses are predicted to fall substantially, shrinking 32% to US$2.27. Yet prior to the latest earnings, the analysts had been forecasting revenues of US$78.0m and losses of US$2.36 per share in 2020. So there seems to have been a moderate uplift in analyst sentiment with the latest consensus release, given the upgrade to loss per share forecasts for this year.
The analysts have cut their price target 25% to US$9.44 per share, suggesting that the declining revenue was a more crucial indicator than the forecast reduction in losses. 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 Adamas Pharmaceuticals at US$20.00 per share, while the most bearish prices it at US$3.00. So we wouldn’t be assigning too much credibility to analyst price targets in this case, because there are clearly some widely different views on what kind of performance this business can generate. As a result it might not be a great idea to make decisions based on the consensus price target, which is after all just an average of this wide range of estimates.
Another way we can view these estimates is in the context of the bigger picture, such as how the forecasts stack up against past performance, and whether forecasts are more or less bullish relative to other companies in the industry. We can infer from the latest estimates that forecasts expect a continuation of Adamas Pharmaceuticals’historical trends, as next year’s 25% revenue growth is roughly in line with 30% annual revenue growth over the past five years. Compare this with the wider industry, which analyst estimates (in aggregate) suggest will see revenues grow 21% next year. So although Adamas Pharmaceuticals is expected to maintain its revenue growth rate, it’s only growing at about the rate of the wider industry.
The Bottom Line
The most important thing to take away is that the analysts reconfirmed their loss per share estimates for next year. Sadly, they also downgraded their sales forecasts, but the business is still expected to grow at roughly the same rate as the industry itself. With that said, earnings are more important to the long-term value of the business. The consensus price target fell measurably, with the analysts seemingly not reassured by the latest results, leading to a lower estimate of Adamas Pharmaceuticals’ future valuation.
Keeping that in mind, we still think that the longer term trajectory of the business is much more important for investors to consider. We have estimates – from multiple Adamas Pharmaceuticals analysts – going out to 2024, and you can see them free on our platform here.
And what about risks? Every company has them, and we’ve spotted 4 warning signs for Adamas Pharmaceuticals you should know about.
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