Some Analysts Just Cut Their Arbutus Biopharma Corporation (NASDAQ:ABUS) Estimates

Market forces rained on the parade of Arbutus Biopharma Corporation (NASDAQ:ABUS) shareholders today, when the analysts downgraded their forecasts for this year. Revenue estimates were cut sharply as analysts signalled a weaker outlook - perhaps a sign that investors should temper their expectations as well.

After the downgrade, the consensus from Arbutus Biopharma's five analysts is for revenues of US$4.4m in 2020, which would reflect a sizeable 26% decline in sales compared to the last year of performance. Losses are predicted to fall substantially, shrinking 60% to US$1.15. Yet prior to the latest estimates, the analysts had been forecasting revenues of US$5.5m and losses of US$1.14 per share in 2020. So there's been quite a change-up of views after the recent consensus updates, withthe analysts making a serious cut to their revenue forecasts while also making no real change to the loss per share numbers.

View our latest analysis for Arbutus Biopharma

the analysts have cut their price target 12% to CA$6.50 per share, signalling that the declining revenue and ongoing losses are contributing to the lower 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. The most optimistic Arbutus Biopharma analyst has a price target of CA$14.07 per share, while the most pessimistic values it at CA$1.32. We would probably assign less value to the forecasts in this situation, because such a wide range of estimates could imply that the future of this business is difficult to value accurately. With this in mind, we wouldn't rely too heavily on the consensus price target, as it is just an average and analysts clearly have some deeply divergent views on the business.

Looking at the bigger picture now, one of the ways we can make sense of these forecasts is to see how they measure up against both past performance and industry growth estimates. We would also point out that the forecast 26% revenue decline is roughly in line with the historical trend, which saw revenues shrink -26% annually over the past five years Yet our data suggests that other companies (with analyst coverage) in the industry are expected, in aggregate, to see their revenues rise 16% over the coming year. So it looks like Arbutus Biopharma's revenues are expected to decline at a slower rate than the wider industry.

The Bottom Line

Regrettably, they also downgraded their revenue estimates, and the latest forecasts imply the business will grow sales slower 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 Arbutus Biopharma's future valuation. Overall, given the drastic downgrade to this year's forecasts, we'd be feeling a little more wary of Arbutus Biopharma going forwards.

With that said, the long-term trajectory of the company's earnings is a lot more important than next year. We have estimates - from multiple Arbutus Biopharma analysts - going out to 2024, 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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