It’s been a good week for Denali Therapeutics Inc. (NASDAQ:DNLI) shareholders, because the company has just released its latest first-quarter results, and the shares gained 9.6% to US$23.89. Statutory losses were a bit smaller than expected, at just US$0.55 per share, even though revenues of US$3.6m missed analyst expectations by a shocking 21%. 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. So we collected the latest post-earnings statutory consensus estimates to see what could be in store for next year.
Taking into account the latest results, the nine analysts covering Denali Therapeutics provided consensus estimates of US$17.7m revenue in 2020, which would reflect a stressful 32% decline on its sales over the past 12 months. Losses are expected to increase slightly, to US$2.27 per share. Before this latest report, the consensus had been expecting revenues of US$24.6m and US$2.40 per share in losses. So there’s been quite a change-up of views after the recent consensus updates, withthe analysts making a serious cut to their revenue forecasts while also reducing the estimated losses the business will incur.
The consensus price target was broadly unchanged at US$28.92, implying that the business is performing roughly in line with expectations, despite adjustments to both revenue and earnings estimates. Fixating on a single price target can be unwise though, since the consensus target is effectively the average of analyst price targets. As a result, some investors like to look at the range of estimates to see if there are any diverging opinions on the company’s valuation. The most optimistic Denali Therapeutics analyst has a price target of US$36.00 per share, while the most pessimistic values it at US$18.00. This is a fairly broad spread of estimates, suggesting that analysts are forecasting a wide range of possible outcomes for the business.
Taking a look at the bigger picture now, one of the ways we can understand these forecasts is to see how they compare to both past performance and industry growth estimates. One thing that stands out from these estimates is that shrinking revenues are expected to moderate from the historical decline of 80% per annum over the past year.
The Bottom Line
The most obvious conclusion is that the analysts made no changes to their forecasts for a loss next year. On the negative side, they also downgraded their revenue estimates, and forecasts imply revenues will perform worse than the wider industry. Even so, earnings per share are more important to the intrinsic value of the business. The consensus price target held steady at US$28.92, with the latest estimates not enough to have an impact on their price targets.
With that in mind, we wouldn’t be too quick to come to a conclusion on Denali Therapeutics. Long-term earnings power is much more important than next year’s profits. At Simply Wall St, we have a full range of analyst estimates for Denali Therapeutics 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 Denali Therapeutics (1 makes us a bit uncomfortable) you should be aware of.
If you spot an error that warrants correction, please contact the editor at email@example.com. 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. Simply Wall St has no position in the stocks mentioned.
We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Thank you for reading.