Outset Medical, Inc. (NASDAQ:OM) Analysts Are Cutting Their Estimates: Here's What You Need To Know

Outset Medical, Inc. (NASDAQ:OM) missed earnings with its latest second-quarter results, disappointing overly-optimistic forecasters. It definitely looks like a negative result overall with revenues falling 12% short of analyst estimates at US$27m. Statutory losses were US$0.66 per share, 32% bigger than what the analysts expected. Following the result, the analysts have updated their earnings model, and it would be good to know whether they think there's been a strong change in the company's prospects, or if it's business as usual. We've gathered the most recent statutory forecasts to see whether the analysts have changed their earnings models, following these results.

Check out our latest analysis for Outset Medical

After the latest results, the consensus from Outset Medical's eight analysts is for revenues of US$110.2m in 2024, which would reflect a perceptible 5.3% decline in revenue compared to the last year of performance. The loss per share is expected to greatly reduce in the near future, narrowing 26% to US$2.27. Yet prior to the latest earnings, the analysts had been forecasting revenues of US$146.5m and losses of US$1.99 per share in 2024. There's been a definite change in sentiment in this update, with the analysts administering a notable cut to next year's revenue estimates, while at the same time increasing their loss per share forecasts.

The consensus price target fell 39% to US$3.54, 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 Outset Medical, with the most bullish analyst valuing it at US$6.00 and the most bearish at US$1.75 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.

One way to get more context on these forecasts is to look at how they compare to both past performance, and how other companies in the same industry are performing. We would highlight that revenue is expected to reverse, with a forecast 10% annualised decline to the end of 2024. That is a notable change from historical growth of 12% over the last three years. By contrast, our data suggests that other companies (with analyst coverage) in the same industry are forecast to see their revenue grow 8.2% annually for the foreseeable future. So although its revenues are forecast to shrink, this cloud does not come with a silver lining - Outset Medical is expected to lag the wider industry.

The Bottom Line

The most important thing to note is the forecast of increased losses next year, suggesting all may not be well at Outset Medical. Unfortunately, they also downgraded their revenue estimates, and our data indicates underperformance compared to the wider industry. Even so, earnings per share are more important to the intrinsic value of the business. The consensus price target fell measurably, with the analysts seemingly not reassured by the latest results, leading to a lower estimate of Outset Medical's future valuation.

With that said, the long-term trajectory of the company's earnings is a lot more important than next year. At Simply Wall St, we have a full range of analyst estimates for Outset Medical going out to 2026, and you can see them free on our platform here..

We don't want to rain on the parade too much, but we did also find 5 warning signs for Outset Medical (1 makes us a bit uncomfortable!) that you need to be mindful of.

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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.