These Analysts Just Made A Significant Downgrade To Their Albireo Pharma, Inc. (NASDAQ:ALBO) EPS Forecasts

Market forces rained on the parade of Albireo Pharma, Inc. (NASDAQ:ALBO) shareholders today, when the analysts downgraded their forecasts for this year. Both revenue and earnings per share (EPS) forecasts went under the knife, suggesting analysts have soured majorly on the business.

Following the latest downgrade, the six analysts covering Albireo Pharma provided consensus estimates of US$33m revenue in 2022, which would reflect a sizeable 35% decline on its sales over the past 12 months. Losses are supposed to balloon 328% to US$7.92 per share. Yet before this consensus update, the analysts had been forecasting revenues of US$44m and losses of US$6.75 per share in 2022. So there's been quite a change-up of views after the recent consensus updates, with the analysts making a serious cut to their revenue forecasts while also expecting losses per share to increase.

Check out our latest analysis for Albireo Pharma

The consensus price target fell 20% to US$52.83, implicitly signalling that lower earnings per share are a leading indicator for Albireo Pharma's 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 Albireo Pharma analyst has a price target of US$68.00 per share, while the most pessimistic values it at US$40.00. There are definitely some different views on the stock, but the range of estimates is not wide enough as to imply that the situation is unforecastable, in our view.

Another way we can view these estimates is in the context of the bigger picture, such as how the forecasts stack up against past performance, and whether forecasts are more or less bullish relative to other companies in the industry. These estimates imply that sales are expected to slow, with a forecast annualised revenue decline of 57% by the end of 2022. This indicates a significant reduction from annual growth of 46% over the last five years. Compare this with our data, which suggests that other companies in the same industry are, in aggregate, expected to see their revenue grow 16% per year. So although its revenues are forecast to shrink, this cloud does not come with a silver lining - Albireo Pharma is expected to lag the wider industry.

The Bottom Line

The most important thing to take away is that analysts increased their loss per share estimates for this year. Regrettably, they also downgraded their revenue estimates, and the latest forecasts imply the business will grow sales slower 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.

Even so, the longer term trajectory of the business is much more important for the value creation of shareholders. At Simply Wall St, we have a full range of analyst estimates for Albireo Pharma going out to 2024, and you can see them free on our platform here.

Another way to search for interesting companies that could be reaching an inflection point is to track whether management are buying or selling, with our free list of growing companies 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.