It’s been a good week for Amarin Corporation plc (NASDAQ:AMRN) shareholders, because the company has just released its latest third-quarter results, and the shares gained 4.2% to US$17.48. Revenues of US$112m beat expectations by a respectable 2.1%, although losses per share increased. Amarin lost US$0.01, which was -72% greater than what analysts thought would happen. Following the result, 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 consensus estimates to see what could be in store for next year.
Following the latest results, Amarin’s eight analysts are now forecasting revenues of US$651m in 2020. This would be a substantial 79% improvement in sales compared to the last 12 months. Amarin is also expected to turn profitable, with earnings of US$0.18 per share. In the lead-up to this report, analysts had been modelling revenues of US$655m and earnings per share (EPS) of US$0.18 in 2020. The consensus analysts don’t seem to have seen anything in these results that would have changed their view on the business, given there’s been no major change to their estimates.
The consensus price target fell -11% to US$29.11, suggesting that analysts might have been a bit enthusiastic in their previous valuation – or they were expecting the company to provide stronger guidance in the quarterly results. 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 Amarin analyst has a price target of US$51.00 per share, while the most pessimistic values it at US$17.00. 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. With this in mind, we wouldn’t assign too much meaning to the consensus price target, as it is just an average and analysts clearly have some deeply divergent views on the business.
Zooming out to look at the bigger picture now, one of the ways we can make sense of these forecasts is to see how they measure up both against past performance, and against industry growth estimates. Analysts are definitely expecting Amarin’s growth to accelerate, with the forecast 79% growth ranking favourably alongside historical growth of 35% per annum over the past five years. Compare this with other companies in the same market, which are forecast to grow their revenue 18% next year. It seems obvious that, while the growth outlook is brighter than the recent past, analysts also expect Amarin to grow faster than the wider market.
The Bottom Line
The most important thing to take away is that there’s been no major change in sentiment, with analysts reconfirming that earnings per share are expected to continue performing in line with their prior expectations. Happily, there were no major changes to revenue forecasts, with analysts still expecting the business to grow faster than the wider market. The consensus price target fell measurably, with analysts seemingly not reassured by the latest results, leading to a lower estimate of Amarin’s future valuation.
Still, the long-term prospects of the business are much more relevant than next year’s earnings. We have estimates – from multiple Amarin analysts – going out to 2023, and you can see them free on our platform here.
We also provide an overview of the Amarin Board and CEO remuneration and length of tenure at the company, and whether insiders have been buying the stock, here.
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