Time To Worry? Analysts Are Downgrading Their Marrone Bio Innovations, Inc. (NASDAQ:MBII) Outlook

The latest analyst coverage could presage a bad day for Marrone Bio Innovations, Inc. (NASDAQ:MBII), with the analysts making across-the-board cuts to their statutory estimates that might leave shareholders a little shell-shocked. 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.

After this downgrade, Marrone Bio Innovations' five analysts are now forecasting revenues of US$44m in 2021. This would be a notable 11% improvement in sales compared to the last 12 months. Losses are expected to be contained, narrowing 12% from last year to US$0.09. Yet prior to the latest estimates, the analysts had been forecasting revenues of US$50m and losses of US$0.074 per share in 2021. Ergo, there's been a clear change in sentiment, with the analysts administering a notable cut to this year's revenue estimates, while at the same time increasing their loss per share forecasts.

View our latest analysis for Marrone Bio Innovations

The consensus price target fell 19% to US$2.63, implicitly signalling that lower earnings per share are a leading indicator for Marrone Bio Innovations' valuation. Fixating on a single price target can be unwise though, since the consensus target is effectively the average of analyst price targets. As a result, some investors like to look at the range of estimates to see if there are any diverging opinions on the company's valuation. Currently, the most bullish analyst values Marrone Bio Innovations at US$4.00 per share, while the most bearish prices it at US$1.65. Note the wide gap in analyst price targets? This implies to us that there is a fairly broad range of possible scenarios for the underlying business.

Of course, another way to look at these forecasts is to place them into context against the industry itself. We can infer from the latest estimates that forecasts expect a continuation of Marrone Bio Innovations'historical trends, as the 22% annualised revenue growth to the end of 2021 is roughly in line with the 24% annual revenue growth over the past five years. By contrast, our data suggests that other companies (with analyst coverage) in a similar industry are forecast to see their revenues grow 4.8% per year. So it's pretty clear that Marrone Bio Innovations is forecast to grow substantially faster than its 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 Marrone Bio Innovations. Unfortunately, analysts also downgraded their revenue estimates, although our data indicates revenues are expected to perform better than the wider market. Given the scope of the downgrades, it would not be a surprise to see the market become more wary of the business.

Still, the long-term prospects of the business are much more relevant than next year's earnings. We have estimates - from multiple Marrone Bio Innovations analysts - going out to 2023, and you can see them 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.
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