Earnings Update: Schrödinger, Inc. (NASDAQ:SDGR) Just Reported And Analysts Are Trimming Their Forecasts

Schrödinger, Inc. (NASDAQ:SDGR) just released its latest annual report and things are not looking great. It was a pretty negative result overall, with revenues of US$108m missing analyst predictions by 3.9%. Worse, the business reported a statutory loss of US$0.41 per share, much larger than the analysts had forecast prior to the result. 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.

View our latest analysis for Schrödinger

Taking into account the latest results, the most recent consensus for Schrödinger from four analysts is for revenues of US$150.4m in 2021 which, if met, would be a major 39% increase on its sales over the past 12 months. Losses are forecast to balloon 58% to US$0.64 per share. Yet prior to the latest earnings, the analysts had been forecasting revenues of US$177.2m and losses of US$0.06 per share in 2021. 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 average price target was broadly unchanged at US$94.25, perhaps implicitly signalling that the weaker earnings outlook is not expected to have a long-term impact on the 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 Schrödinger at US$110 per share, while the most bearish prices it at US$88.00. Still, with such a tight range of estimates, it suggeststhe analysts have a pretty good idea of what they think the company is worth.

Of course, another way to look at these forecasts is to place them into context against the industry itself. The analysts are definitely expecting Schrödinger's growth to accelerate, with the forecast 39% annualised growth to the end of 2021 ranking favourably alongside historical growth of 22% per annum over the past three 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 Schrödinger to grow faster than 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 Schrödinger. Regrettably, they also downgraded their revenue estimates, but the latest forecasts still imply the business will grow faster than the wider industry. There was no real change to the consensus price target, suggesting that the intrinsic value of the business has not undergone any major changes with the latest estimates.

Keeping that in mind, we still think that the longer term trajectory of the business is much more important for investors to consider. At Simply Wall St, we have a full range of analyst estimates for Schrödinger going out to 2025, and you can see them free on our platform here..

However, before you get too enthused, we've discovered 2 warning signs for Schrödinger that you should be aware of.

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