Analysts Are Updating Their Alector, Inc. (NASDAQ:ALEC) Estimates After Its Full-Year Results

As you might know, Alector, Inc. (NASDAQ:ALEC) just kicked off its latest full-year results with some very strong numbers. Results overall were credible, with revenues arriving 6.5% better than analyst forecasts at US$97m. Higher revenues also resulted in lower statutory losses, which were US$1.56 per share, some 6.5% smaller than the analysts expected. 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. So we gathered the latest post-earnings forecasts to see what estimates suggest is in store for next year.

See our latest analysis for Alector

Following the recent earnings report, the consensus from ten analysts covering Alector is for revenues of US$62.0m in 2024. This implies a painful 36% decline in revenue compared to the last 12 months. Per-share losses are expected to explode, reaching US$1.68 per share. Yet prior to the latest earnings, the analysts had been forecasting revenues of US$99.5m and losses of US$2.08 per share in 2024. We can see there's definitely been a change in sentiment in this update, with the analysts administering a meaningful downgrade to next year's revenue estimates, while at the same time reducing their loss estimates.

There was no major change to the US$15.80average price target, suggesting that the adjustments to revenue and earnings are not expected to have a long-term impact on the business. That's not the only conclusion we can draw from this data however, as some investors also like to consider the spread in estimates when evaluating analyst price targets. The most optimistic Alector analyst has a price target of US$41.00 per share, while the most pessimistic values it at US$4.00. As you can see the range of estimates is wide, with the lowest valuation coming in at less than half the most bullish estimate, suggesting there are some strongly diverging views on how analysts think this business will perform. With this in mind, we wouldn't rely too heavily the consensus price target, as it is just an average and analysts clearly have some deeply divergent views on the business.

Taking a look at the bigger picture now, one of the ways we can understand these forecasts is to see how they compare to both past performance and industry growth estimates. These estimates imply that revenue is expected to slow, with a forecast annualised decline of 36% by the end of 2024. This indicates a significant reduction from annual growth of 36% 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 18% per year. It's pretty clear that Alector's revenues are expected to perform substantially worse than the wider industry.

The Bottom Line

The most obvious conclusion is that the analysts made no changes to their forecasts for a loss next year. On the negative side, they also downgraded their revenue estimates, and forecasts imply they will perform worse than the wider industry. With that said, earnings are more important to the long-term value of the business. The consensus price target held steady at US$15.80, with the latest estimates not enough to have an impact on their price targets.

With that in mind, we wouldn't be too quick to come to a conclusion on Alector. Long-term earnings power is much more important than next year's profits. At Simply Wall St, we have a full range of analyst estimates for Alector going out to 2026, and you can see them free on our platform here..

That said, it's still necessary to consider the ever-present spectre of investment risk. We've identified 5 warning signs with Alector (at least 1 which is a bit unpleasant) , and understanding them should be part of your investment process.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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.