Time To Worry? Analysts Are Downgrading Their AbCellera Biologics Inc. (NASDAQ:ABCL) Outlook

The analysts covering AbCellera Biologics Inc. (NASDAQ:ABCL) delivered a dose of negativity to shareholders today, by making a substantial revision to their statutory forecasts for this year. Both revenue and earnings per share (EPS) forecasts went under the knife, suggesting the analysts have soured majorly on the business. Investors however, have been notably more optimistic about AbCellera Biologics recently, with the stock price up a remarkable 22% to US$33.96 in the past week. It will be interesting to see if the downgrade has an impact on buying demand for the company's shares.

After the downgrade, the four analysts covering AbCellera Biologics are now predicting revenues of US$524m in 2021. If met, this would reflect a huge 125% improvement in sales compared to the last 12 months. Per-share earnings are expected to shoot up 28% to US$0.96. Prior to this update, the analysts had been forecasting revenues of US$849m and earnings per share (EPS) of US$2.27 in 2021. It looks like analyst sentiment has declined substantially, with a sizeable cut to revenue estimates and a large cut to earnings per share numbers as well.

See our latest analysis for AbCellera Biologics

It'll come as no surprise then, to learn that the analysts have cut their price target 5.4% to US$52.40. 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 AbCellera Biologics at US$55.00 per share, while the most bearish prices it at US$45.00. Even so, with a relatively close grouping of estimates, it looks like the analysts are quite confident in their valuations, suggesting AbCellera Biologics is an easy business to forecast or the underlying assumptions are obvious.

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. It's pretty clear that there is an expectation that AbCellera Biologics' revenue growth will slow down substantially, with revenues to the end of 2021 expected to display 125% growth on an annualised basis. This is compared to a historical growth rate of 1,898% over the past year. Juxtapose this against the other companies in the industry with analyst coverage, which are forecast to grow their revenues (in aggregate) 8.1% per year. So it's pretty clear that, while AbCellera Biologics' revenue growth is expected to slow, it's still expected to grow faster than the industry itself.

The Bottom Line

The biggest issue in the new estimates is that analysts have reduced their earnings per share estimates, suggesting business headwinds lay ahead for AbCellera Biologics. Unfortunately, analysts also downgraded their revenue estimates, although our data indicates revenues are expected to perform better than the wider market. With a serious cut to this year's expectations and a falling price target, we wouldn't be surprised if investors were becoming wary of AbCellera Biologics.

There might be good reason for analyst bearishness towards AbCellera Biologics, like concerns around earnings quality. Learn more, and discover the 1 other risk 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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