Analysts Have Been Trimming Their Genscript Biotech Corporation (HKG:1548) Price Target After Its Latest Report

It's been a mediocre week for Genscript Biotech Corporation (HKG:1548) shareholders, with the stock dropping 10% to HK$16.94 in the week since its latest full-year results. Revenues of US$626m fell short of estimates by 13%, but statutory losses were relatively mild, coming in 4.3% smaller than the analysts expected, at US$0.11 per share. The analysts typically update their forecasts at each earnings report, and we can judge from their estimates whether their view of the company has changed or if there are any new concerns to be aware of. So we collected the latest post-earnings statutory consensus estimates to see what could be in store for next year.

View our latest analysis for Genscript Biotech

Taking into account the latest results, the most recent consensus for Genscript Biotech from six analysts is for revenues of US$867.6m in 2023 which, if met, would be a sizeable 39% increase on its sales over the past 12 months. The loss per share is expected to greatly reduce in the near future, narrowing 30% to US$0.075. Before this earnings announcement, the analysts had been modelling revenues of US$1.03b and losses of US$0.093 per share in 2023. We can see there's definitely been a change in sentiment in this update, with the analysts administering a meaningful downgrade to next year's revenue estimates, while at the same time reducing their loss estimates.

The consensus price target fell 5.2% to HK$29.98, with the dip in revenue estimates clearly souring sentiment, despite 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. There are some variant perceptions on Genscript Biotech, with the most bullish analyst valuing it at HK$35.08 and the most bearish at HK$18.50 per share. With such a wide range in price targets, analysts are almost certainly betting on widely divergent outcomes in the underlying business. 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.

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. The analysts are definitely expecting Genscript Biotech's growth to accelerate, with the forecast 39% annualised growth to the end of 2023 ranking favourably alongside historical growth of 27% per annum 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 17% per year. It seems obvious that, while the growth outlook is brighter than the recent past, the analysts also expect Genscript Biotech to grow faster than the wider industry.

The Bottom Line

The most obvious conclusion is that the analysts made no changes to their forecasts for a loss next year. Regrettably, they also downgraded their revenue estimates, but the latest forecasts still imply the business will grow faster than the wider industry. Still, earnings per share are more important to value creation for shareholders. The consensus price target fell measurably, with the analysts seemingly not reassured by the latest results, leading to a lower estimate of Genscript Biotech's future valuation.

With that in mind, we wouldn't be too quick to come to a conclusion on Genscript Biotech. Long-term earnings power is much more important than next year's profits. We have estimates - from multiple Genscript Biotech analysts - going out to 2025, and you can see them free on our platform here.

It is also worth noting that we have found 1 warning sign for Genscript Biotech that you need to take into consideration.

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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.