Time To Worry? Analysts Are Downgrading Their Akeso, Inc. (HKG:9926) Outlook

One thing we could say about the analysts on Akeso, Inc. (HKG:9926) - they aren't optimistic, having just made a major negative revision to their near-term (statutory) forecasts for the organization. Both revenue and earnings per share (EPS) estimates were cut sharply as the analysts factored in the latest outlook for the business, concluding that they were too optimistic previously. Investors however, have been notably more optimistic about Akeso recently, with the stock price up a notable 19% to HK$25.65 in the past week. Whether the downgrade will have a negative impact on demand for shares is yet to be seen.

Following the downgrade, the current consensus from Akeso's twelve analysts is for revenues of CN¥1.0b in 2022 which - if met - would reflect a huge 287% increase on its sales over the past 12 months. Losses are presumed to reduce, shrinking 14% from last year to CN¥1.31. Yet prior to the latest estimates, the analysts had been forecasting revenues of CN¥1.1b and losses of CN¥1.16 per share in 2022. So there's been quite a change-up of views after the recent consensus updates, with the analysts making a serious cut to their revenue forecasts while also expecting losses per share to increase.

Check out our latest analysis for Akeso

The consensus price target fell 8.0% to CN¥30.14, with the analysts clearly concerned about the company following the weaker revenue and earnings outlook. There's another way to think about price targets though, and that's to look at the range of price targets put forward by analysts, because a wide range of estimates could suggest a diverse view on possible outcomes for the business. There are some variant perceptions on Akeso, with the most bullish analyst valuing it at CN¥51.62 and the most bearish at CN¥27.81 per share. This is a fairly broad spread of estimates, suggesting that the 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. It's clear from the latest estimates that Akeso's rate of growth is expected to accelerate meaningfully, with the forecast 14x annualised revenue growth to the end of 2022 noticeably faster than its historical growth of 102% over the past year. Compare this with other companies in the same industry, which are forecast to grow their revenue 41% annually. It seems obvious that, while the growth outlook is brighter than the recent past, the analysts also expect Akeso to grow faster than the wider 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 Akeso. While analysts did downgrade their revenue estimates, these forecasts still imply revenues will perform better than the wider market. After such a stark change in sentiment from analysts, we'd understand if readers now felt a bit wary of Akeso.

Still, the long-term prospects of the business are much more relevant than next year's earnings. At Simply Wall St, we have a full range of analyst estimates for Akeso going out to 2024, and you can see them free on our platform here.

Another way to search for interesting companies that could be reaching an inflection point is to track whether management are buying or selling, with our free list of growing companies 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.