What Does The Future Hold For Fulgent Genetics, Inc. (NASDAQ:FLGT)? These Analysts Have Been Cutting Their Estimates

The analysts covering Fulgent Genetics, Inc. (NASDAQ:FLGT) delivered a dose of negativity to shareholders today, by making a substantial revision to their statutory forecasts for next year. Revenue estimates were cut sharply as the analysts signalled a weaker outlook - perhaps a sign that investors should temper their expectations as well. The stock price has risen 6.7% to US$37.02 over the past week. Investors could be forgiven for changing their mind on the business following the downgrade; but it's not clear if the revised forecasts will lead to selling activity.

Following the latest downgrade, the current consensus, from the two analysts covering Fulgent Genetics, is for revenues of US$262m in 2023, which would reflect a sizeable 67% reduction in Fulgent Genetics' sales over the past 12 months. Prior to the latest estimates, the analysts were forecasting revenues of US$349m in 2023. It looks like forecasts have become a fair bit less optimistic on Fulgent Genetics, given the pretty serious reduction to revenue estimates.

Check out the opportunities and risks within the US Healthcare industry.

Notably, the analysts have cut their price target 15% to US$57.50, suggesting concerns around Fulgent Genetics' valuation. 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. Currently, the most bullish analyst values Fulgent Genetics at US$65.00 per share, while the most bearish prices it at US$50.00. Even so, with a relatively close grouping of estimates, it looks like the analysts are quite confident in their valuations, suggesting Fulgent Genetics is an easy business to forecast or the underlying assumptions are obvious.

Another way we can view these estimates is in the context of the bigger picture, such as how the forecasts stack up against past performance, and whether forecasts are more or less bullish relative to other companies in the industry. We would highlight that sales are expected to reverse, with a forecast 59% annualised revenue decline to the end of 2023. That is a notable change from historical growth of 68% over the last five years. Compare this with our data, which suggests that other companies in the same industry are, in aggregate, expected to see their revenue grow 7.6% per year. So although its revenues are forecast to shrink, this cloud does not come with a silver lining - Fulgent Genetics is expected to lag the wider industry.

The Bottom Line

The clear low-light was that analysts slashing their revenue forecasts for Fulgent Genetics next year. They also expect company revenue to perform worse than the wider market. The consensus price target fell measurably, with analysts seemingly not reassured by recent business developments, leading to a lower estimate of Fulgent Genetics' future valuation. Overall, given the drastic downgrade to next year's forecasts, we'd be feeling a little more wary of Fulgent Genetics going forwards.

That said, the analysts might have good reason to be negative on Fulgent Genetics, given recent substantial insider selling. Learn more, and discover the 2 other concerns we've identified, for free on our platform here.

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.