Time To Worry? Analysts Are Downgrading Their Jacobio Pharmaceuticals Group Co., Ltd. (HKG:1167) Outlook

Market forces rained on the parade of Jacobio Pharmaceuticals Group Co., Ltd. (HKG:1167) shareholders today, when the analysts downgraded their forecasts for this year. Revenue and earnings per share (EPS) forecasts were both revised downwards, with the analysts seeing grey clouds on the horizon. Bidders are definitely seeing a different story, with the stock price of HK$5.25 reflecting a 19% rise in the past week. It will be interesting to see if the downgrade has an impact on buying demand for the company's shares.

After this downgrade, Jacobio Pharmaceuticals Group's twin analysts are now forecasting revenues of CN¥175m in 2022. This would be a solid 17% improvement in sales compared to the last 12 months. Losses are supposed to balloon 21% to CN¥0.46 per share. Yet prior to the latest estimates, the analysts had been forecasting revenues of CN¥200m and losses of CN¥0.41 per share in 2022. Ergo, there's been a clear change in sentiment, with the analysts administering a notable cut to this year's revenue estimates, while at the same time increasing their loss per share forecasts.

View our latest analysis for Jacobio Pharmaceuticals Group

The consensus price target fell 9.4% to CN¥11.15, with the analysts clearly concerned about the company following the weaker revenue and earnings outlook. That's not the only conclusion we can draw from this data however, as some investors also like to consider the spread in estimates when evaluating analyst price targets. Currently, the most bullish analyst values Jacobio Pharmaceuticals Group at CN¥19.09 per share, while the most bearish prices it at CN¥6.46. We would probably assign less value to the forecasts in this situation, because such a wide range of estimates could imply that the future of this business is difficult to value accurately. As a result it might not be possible to derive much meaning from the consensus price target, which is after all just an average of this wide range of estimates.

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 stands out from these estimates, which is that Jacobio Pharmaceuticals Group is forecast to grow faster in the future than it has in the past, with revenues expected to display 17% annualised growth until the end of 2022. If achieved, this would be a much better result than the 72% annual decline over the past year. By contrast, our data suggests that other companies (with analyst coverage) in a similar industry are forecast to see their revenue grow 40% per year. So although Jacobio Pharmaceuticals Group's revenue growth is expected to improve, it is still expected to grow slower than the industry.

The Bottom Line

The most important thing to note from this downgrade is that the consensus increased its forecast losses this year, suggesting all may not be well at Jacobio Pharmaceuticals Group. Regrettably, they also downgraded their revenue estimates, and the latest forecasts imply the business will grow sales slower than the wider market. With a serious cut to this year's expectations and a falling price target, we wouldn't be surprised if investors were becoming wary of Jacobio Pharmaceuticals Group.

As you can see, the analysts clearly aren't bullish, and there might be good reason for that. We've identified some potential issues with Jacobio Pharmaceuticals Group's financials, such as recent substantial insider selling. For more information, you can click here to discover this and the 2 other concerns we've identified.

Of course, seeing company management invest large sums of money in a stock can be just as useful as knowing whether analysts are downgrading their estimates. So you may also wish to search this free list of stocks that insiders are buying.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. 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.