Shareholders in Seattle Genetics, Inc. (NASDAQ:SGEN) may be thrilled to learn that the analysts have just delivered a major upgrade to their near-term forecasts. The analysts greatly increased their revenue estimates, suggesting a stark improvement in business fundamentals. Seattle Genetics has also found favour with investors, with the stock up a remarkable 18% to US$175 over the past week. It will be interesting to see if today’s upgrade is enough to propel the stock even higher.
After this upgrade, Seattle Genetics’ 19 analysts are now forecasting revenues of US$1.4b in 2020. This would be a sizeable 35% improvement in sales compared to the last 12 months. Losses are presumed to reduce, shrinking 11% from last year to US$1.33. However, before this estimates update, the consensus had been expecting revenues of US$1.2b and US$2.06 per share in losses. So there’s been quite a change-up of views after the recent consensus updates, with the analysts making a sizeable increase to their revenue forecasts while also reducing the estimated loss as the business grows towards breakeven.
There was no major change to the consensus price target of US$184, perhaps suggesting that the analysts remain concerned about ongoing losses despite the improved earnings and revenue outlook. 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. There are some variant perceptions on Seattle Genetics, with the most bullish analyst valuing it at US$252 and the most bearish at US$138 per share. Note the wide gap in analyst price targets? This implies to us that there is a fairly broad range of possible scenarios for the underlying business.
Looking at the bigger picture now, one of the ways we can make sense of these forecasts is to see how they measure up against both past performance and industry growth estimates. It’s clear from the latest estimates that Seattle Genetics’ rate of growth is expected to accelerate meaningfully, with the forecast 35% revenue growth noticeably faster than its historical growth of 24% p.a. over the past five years. By contrast, our data suggests that other companies (with analyst coverage) in a similar industry are forecast to grow their revenue at 20% per year. It seems obvious that, while the growth outlook is brighter than the recent past, the analysts also expect Seattle Genetics to grow faster than the wider industry.
The Bottom Line
The highlight for us was that the consensus reduced its estimated losses this year, perhaps suggesting Seattle Genetics is moving incrementally towards profitability. Fortunately, analysts also upgraded their revenue estimates, and our data indicates sales are expected to perform better than the wider market. The lack of change in the price target is puzzling, but with a serious upgrade to this year’s earnings expectations, it might be time to take another look at Seattle Genetics.
That’s a pretty serious upgrade, but shareholders might be even more pleased to know that forecasts expect Seattle Genetics to be able to reach break-even within the next few years. For more information, you can click through to our free platform to learn more about these forecasts.
Of course, seeing company management invest large sums of money in a stock can be just as useful as knowing whether analysts are upgrading their estimates. So you may also wish to search this free list of stocks that insiders are buying.
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